BANK of China Ltd. (BOC) has told clients it’s willing to shoulder part of the US$1 billion loss suffered by thousands of retail investors after a product linked to the price of oil collapsed last month.

BOC dropped a claim to seek additional payments from clients to cover losses from its settlement of an investment product at a price below zero, mirroring a collapse in an oil futures contract, according to four retail investors who received phone calls from the lender this week. The bank will also return 20 percent of the initial investment to some clients, they said.

The proposal came after Chinese regulators pressured the lender to absorb some of the losses amid a public uproar and as other banks halted sales of similar commodity-linked investment products. The turmoil even reached the highest level of government, with Vice Premier Liu He on Monday issuing a statement calling on banks to strengthen controls over such products and protect investors.

Bank of China’s “Crude Oil Treasure” product had attracted thousands of retail investors seeking to speculate on West Texas Intermediate (WTI) crude futures. The product collapsed April 20, when the price of the May futures contract plummeted to a record minus US$37.63 a barrel, not only wiping out bullish bets but also leaving some clients owing the bank money.

Beijing-based BOC said April 24 that about 46 percent of the investors had liquidated their positions April 20, while the remaining chose to either roll over their positions or settle at the expiration, including both long and short positions. The bank also said it will fully review its product design, risk control and related procedures and take responsibilities within the legal framework and make the best effort to safeguard clients’ interests.

The turmoil is drawing further attention to China’s US$3 trillion industry for bank wealth products, which invest in everything from bonds and stocks to foreign exchange and commodities.

The possible partial bailout also underscores the challenge to regulators, who have been trying to do away with the implicit guarantees often offered by banks and to instill more risk awareness among millions of retail investors.

Bank of China hasn’t disclosed the size or performance of “Crude Oil Treasure” since launching the product in January 2018. (SD-Agencies)