SHANGHAI Aug 29 The international arm of Bank
of China has set up a commodities trading unit on
the mainland as it looks to beef up its presence in the sector,
a senior bank official said.
Chinese regulations prohibit banks from trading physical
commodities, with the exception of gold. Therefore Bank of
China, the country's fourth largest lender by market value, used
its overseas subsidiary to apply for a trading license.
As a wholly foreign-owned enterprise (WFOE), Bank of China
International (BOCI) is allowed to trade physical commodities
onshore and futures contracts through brokerages on the Shanghai
Futures Exchange, the official told Reuters.
"We received the WFOE license in June and we're preparing to
launch our trading operations," Jiang Xu, deputy general manager
of BOCI's global trade services, told Reuters on the sidelines
of a conference in Shanghai on Thursday.
"The bank already has operations in New York, London and
Singapore, each focusing on different commodities. We want to
build on our strength and grow our commodities business."
Bank of China International plans to start trading in base
metals and may expand to other products later, Jiang said.
While China's massive demand for resources has underpinned
worldwide markets for everything from oil to iron ore, Chinese
banks have been relatively slow to embrace commodities trading.
Bank of China Ltd last year became the first Chinese member
of the London Metal Exchange and the CME Group and is
the most advanced in the commodities space among its Chinese
peers. Its New York office focuses on agricultural products and
it also has oil and oil products trading desks in Singapore and
Other Chinese banks are also eager to build a commodities
trading arm, as Western banks which have dominated the market
are cutting back or shutting their commodities operations on
growing regulatory restrictions and balance sheet constraints.
ICBC, China's biggest bank by assets, is in
advanced talks to buy Standard Bank's markets business
in London, which includes currency and commodities trading, for
more than $500 million.
Banks with commodities trading WFOEs in China include Morgan
Stanley, Standard Chartered, Standard Bank,
JPMorgan Chase & Co., Deutsche Bank and
(Editing by Himani Sarkar)