Shanghai to Investigate Use of Banking and Insurance Funds to Speculate in the Commodities Market

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The Shanghai branch of China’s banking regulator has announced that it will launch an investigation into illicit flows of banking and insurance funds into the commodities market amidst the country’s most recent spate of breakneck inflation and power shortages.

The Shanghai banking regulator issued the “Notice on Matters in Relation to Effectively Providing Financial Services for the Regular Operation of the Coal Power Sector and the Orderly Circulation of Commodities Markets, and Ensuring Stable Operation of the Economy” (做好煤电行业正常生产和商品市场有序流通金融服务保障经济平稳运行有关事项的通知) on 27 October.

The Regulator said that it would “strictly inspect the illicit flow of bank and insurance funds into commodities markets, and strictly strike against banks and insurance funds that are misappropriated for illicit and illegal behaviour including opportunistic speculation, hoarding and driving up prices.”

“[We] will strictly prevent bank and insurance funds from influencing the regular order of the commodity market, and strictly ban the appropriation of funds from loans or the misuse of wealth management and trust funds to participate in speculation in coal, iron, non-ferrous metals and other commodities in breach of regulations,” said the authority.

“[We] will strictly prevent bank and insurance funds from illicitly flowing into the stock market, the bond market and the futures market and influencing commodities prices, and avoid empty circulation and arbitrage.”

The authority warned that it would “adopt lawful administrative measures against those institutions whose self-inspections are not earnest, who do not make active reports and who engage in malfeasant conduct,” as well as “promptly launch administrative punitive procedures and lawfully and strictly seek accountability.”

The Shanghai banking regulator will also establish “quick response measures” for qualified coal power and heating enterprises, open up “green lending channels” and provide preferential loan review and approval measures in some cases, in order to ensure that the public has access to heating during the winter.

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