Financial Blog Corliss Group Lenders Fear Spread of Chinese Commodities Fraud Case
Financial Blog Corliss Group Lenders Fear Spread of
Chinese Commodities Fraud Case
Large banks and trading firms are frantically trying to determine whether they have fallen victim to a suspected commodities fraud emanating from the giant Qingdao Port in northeast China.
Citigroup and several other large Western banks are concerned that their loans may lack the appropriate collateral, big stockpiles of copper and aluminum at the port. The banks have inspectors on the ground who are trying to assess whether enough of the metals are there.
The worry stems from suspicions that a Chinese company pledged the same collateral for multiple loans. Chinese authorities are investigating the matter.
The case could have broad repercussions for the commodities market and the Chinese economy. Banks have funneled billions of dollars into the Chinese economy through these murky transactions, and commodities prices have been falling over concerns that such lending will dry up.
Western banks, including Citigroup, are bracing for any potential fallout.
Just months ago, Citigroup fell victim to a multimillion-dollar fraud in Mexico. If the Qingdao developments harm the bank, regulators and shareholders are likely to press it to explain why its controls had failed again.
Chinese companies are at risk, too.
Citic Resources, part of the state-controlled conglomerate Citic Group, plunged nearly 10 percent on Tuesday after it disclosed that it might be affected by an investigation into stockpiles of metals held at the port. Citic Resources said on Monday that it had asked the local Chinese courts to secure its metals stockpiles. The shares recovered on Wednesday.
The potential fraud is linked to an opaque corner of China’s financial system that has grown substantially in recent years, bringing huge amounts of capital into the country. Many
Chinese companies and investors, struggling to secure traditional loans from the statedominated banking sector, have instead
Chinese Commodities Fraud Case
Large banks and trading firms are frantically trying to determine whether they have fallen victim to a suspected commodities fraud emanating from the giant Qingdao Port in northeast China.
Citigroup and several other large Western banks are concerned that their loans may lack the appropriate collateral, big stockpiles of copper and aluminum at the port. The banks have inspectors on the ground who are trying to assess whether enough of the metals are there.
The worry stems from suspicions that a Chinese company pledged the same collateral for multiple loans. Chinese authorities are investigating the matter.
The case could have broad repercussions for the commodities market and the Chinese economy. Banks have funneled billions of dollars into the Chinese economy through these murky transactions, and commodities prices have been falling over concerns that such lending will dry up.
Western banks, including Citigroup, are bracing for any potential fallout.
Just months ago, Citigroup fell victim to a multimillion-dollar fraud in Mexico. If the Qingdao developments harm the bank, regulators and shareholders are likely to press it to explain why its controls had failed again.
Chinese companies are at risk, too.
Citic Resources, part of the state-controlled conglomerate Citic Group, plunged nearly 10 percent on Tuesday after it disclosed that it might be affected by an investigation into stockpiles of metals held at the port. Citic Resources said on Monday that it had asked the local Chinese courts to secure its metals stockpiles. The shares recovered on Wednesday.
The potential fraud is linked to an opaque corner of China’s financial system that has grown substantially in recent years, bringing huge amounts of capital into the country. Many
Chinese companies and investors, struggling to secure traditional loans from the statedominated banking sector, have instead