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Caixin

Chinese banks to freeze new accounts for precious metal trades

Move comes after global price volatility saddles investors with huge losses

Major Chinese banks have warned customers to become more aware of risks as investor losses have made regulators wary of complaints.   © Reuters

At least seven Chinese banks, including all of the country's state-owned "Big Four," said they would suspend the opening of new accounts for precious metals trading, according to public notices posted on the banks' websites.

The move comes after volatile metal prices in recent months caused some investors to chalk up huge losses on international markets.

The suspensions were likely linked to disputes between banks and customers left out of pocket due to the price fluctuations, said Zhong Jingji, a department director at trading company Western Futures.

In April, a collapse in global oil prices caused losses of $1.4 billion among investors who had bet on Bank of China's crude futures product. An executive at a major bank told Caixin that the incident had made regulators more "cautious" about complaints from investors.

China Construction Bank said in a Friday notice that it would temporarily halt the opening of new accounts for trading in precious metals, including gold and silver, and in investment products at the Shanghai Gold Exchange starting Monday, due to "recent dramatic price fluctuations ... on the international market linked to the COVID-19 pandemic and global political and economic factors." The notice did not say when normal business would be resumed.

The other three major state-owned banks made similar statements. Bank of China said it would suspend individual services linked to the Shanghai Gold Exchange from Saturday, while Industrial and Commercial Bank of China and Agricultural Bank of China both said they would stop opening precious metals trading accounts and business related to the exchange.

All of the Big Four four told customers to "raise risk awareness and rationally control positions."

Caixin has learned that an individual investor lost nearly 7 million yuan ($1.1 million) in the 18 trading days to Sept. 24 after purchasing silver contracts on the Shanghai Gold Exchange for 10 million yuan in a deal brokered by a third party backed by Shanghai Pudong Development Bank.

The investor has reported the loss to regulators, including the China Banking and Insurance Regulatory Commission and People's Bank of China, the country's central bank.

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Read also the original story.

Caixinglobal.com is the English-language online news portal of Chinese financial and business news media group Caixin. Nikkei recently agreed with the company to exchange articles in English.

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