Thousands of Chinese investors were shocked last Wednesday after receiving a notice from the bank of China, telling them they’d lost their investment; with some even owing the bank tens of thousands of dollars.
These individual investors had put their money in a product linked to foreign oil futures, called “Crude oil Bao,” sold by the state-owned Bank of China.
After last Monday’s oil price crash, Bank of China halted new transactions for this product. Two days later, it told investors they need to pay what they owe the bank based on the historically low price of -$37.63 a barrel.
Investors were stunned. According to a report by Radio Free Asia, the investors’ total loss could be over $4 billion.
Angry investors are questioning the bank’s risk management and disclosure practices. Some say their agreement states investors will be warned when their loss is over 50 percent, but they hadn’t received any warning.
They also said the bank didn’t flag any risk that oil prices could turn negative.
According to local media reports, some investors in several cities went to Bank of China branches and regulatory agencies from Wednesday to demand answers. They are also getting together to file class-action lawsuits against the bank.