China backs state firms on oil options losses

BEIJING (Reuters) – Beijing has publicly put its weight behind some state-owned firms struggling with oil derivatives losses, saying it will back them in any legal action against the foreign banks that sold the products.

In a statement on Monday, the State-owned Assets Supervision and Administration Commission said that some state-owned enterprises had sent letters to their trading partners about oil structured options trades, confirming a report in Caijing magazine last week that had sent shudders through the banking community.

“(SASAC) will support companies to minimise losses and protect rights through negotiations and holdings management. We also reserve the right to launch legal suits,” the agency said.

The move is the latest by SASAC to curb the over-the-counter derivatives business after a series of corporate commodity and forex hedging deals went spectacularly bad over the past 10 months, costing Chinese state firms billions of dollars.

Bankers were unhappy with the latest developments.

Reuters