Bank of China Offers 20% Compensation Plan to Clients Burnt by Crude Oil Futures


Bank of China (BOC) has put together a compensation plan for clients of the state-owned lender who sustained heavy losses on its oil futures products.

According to a report from on 5 May BOC contacted some of its clients who lost money on its Crude Oil Treasure product with offers of a compensation plan

The compensation would involve BOC bearing losses up until the deposit amount of clients, and providing compensation for 20% of their positions as of 22:00 20 April – the day when crude oil prices plunged into negative territory and led to heavy losses for investors.

While BOC also issued a public announcement about Crude Oil Treasure losses on 5 May, it did not contain any mention of compensation.

Hun­dreds of BOC’s re­tail in­vestors lost around 600 mil­lion yuan (ap­prox. $85 mil­lion) in total af­ter plac­ing bets on West Texas In­ter­me­di­ate via its Crude Oil Trea­sure in­stru­ment, just prior to the com­mod­i­ty’s plunge into neg­a­tive ter­ri­tory on 20 April. 

BOC’s “Crude Oil Trea­sure” prod­uct en­abled Chi­na’s do­mes­tic in­vestors to tap West Texas In­ter­me­di­ate oil fu­tures with­out the need to launch an off­shore ac­count. The prod­uct did not per­mit lever­age and re­quired 100% mar­gin. 

The losses have re­port­edly prompted up to 1000 burnt BOC cus­tomers to seek le­gal ad­vice in re­la­tion to pur­su­ing a class ac­tion against the big state-owned bank, for full re­cov­ery of prin­ci­pal due to in­va­lid­ity of con­tract. 

Chinese authorities have also stepped up warnings in relation to sale of similar instruments to retail investors.

On 30 April the China Banking and Insurance Regulatory Commission (CBIRC) said with regard to the Crude Oil Treasure scandal that it was “paying close attention to this risk incident,” and “in the first instance has requested that Bank of China resolve the matter in accordance with laws and regulations, engage in equal negotiation with customers, promptly respond to concerns, and pragmatically protect the lawful rights and interests of customers.”

CBIRC also required that BOC “strictly manage products, strengthen risk controls and raise emergency management capability for irregular market fluctuations.”

The Crude Oil Treasure was rated an “R3” on a five-step scale from R1 to R5 for wealth management products in China, meaning that it did not provide principal guarantees.

R3 products can be used for investment in low-volatility financial products such as bonds and interbank deposits, as well as allocate up to 30% of funds to stocks, forex and other high-volatility products.

Bank of China said in a media report dating from 2018 that the Crude Oil Treasure was “highly suitable to investors who have just come into contact with the crude oil market,” triggering scrutiny in China over whether or not the product was appropriate for clients.

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