(Yicai Global) July 18 -- Chinese lenders have been scaling back their offering of precious metal investment products to retail clients since Bank of China customers ended up out of pocket two years ago when a crude oil futures-related product turned sour.

More than 20 banks have shrunk their precious metal investment businesses since 2020, and lenders will likely withdraw from it entirely and only retain products related to physical assets, industry insiders told Yicai Global.

The scaling down followed in the wake of huge losses for Bank of China clients who invested in a product linked with US crude oil futures when oil prices turned negative in April 2020. China’s securities regulator subsequently fined the state-owned bank more than CNY50 million (USD7.4 million).

Industrial and Commercial Bank of China has raised the margins on individual clients’ metal transactions six times this year to 42 percent from 23 percent. The bank will suspend opening new accounts for gold and silver trading from Aug. 15, it said on July 15.

Industry insiders also said that in addition to gradually withdrawing investment products linked to commodity futures, banks are variously addressing risk by restricting new account openings, allowing only existing clients to trade, setting higher investment thresholds, and assessing punters ability to withstand risk.

Many gold investors have been withdrawing from exchange-traded funds and major futures markets as commodity prices have been volatile and the US Federal Reserve has been quickly hiking borrowing costs, said Wang Xiang, a gold ETF manager at Bosera Asset Management. Gold prices will remain low in the short term, he added.

Editors: Shi Yi, Emmi Laine, Xiao Yi