LONDON Aug 6 Standard Chartered Plc
said its $175 million provision to cover its exposure to
suspected commodities fraud in China was the result of a
conservative view of possible costs but didn't believe there
were widespread problems in the sector.
Chinese authorities launched an investigation in May into
whether metals trading firm Decheng Mining and related companies
used fake warehouse receipts at Qingdao Port to obtain multiple
loans secured against a single cargo of metal.
"We believe that in the provisioning we have taken we have
taken a very conservative approach. Our exposure in the
warehouses around Qingdao is around $250 million in total,"
StanChart Chief Executive Peter Sands told reporters on a call
on Wednesday after the London-based bank announced first-half
"We have looked at all our commodities-related exposures in
China and elsewhere, and our sense is this ... is a particular
problem related to some particular individuals and companies in
one location," Sands said.
According to court documents seen by Reuters last month,
StanChart is suing Chen Jihong, the Chinese businessman at the
center of the suspected fraud at Qingdao port, joining a list of
companies which have taken legal action to try to reclaim
StanChart spokeswoman Valerie Tay confirmed last month that
the bank had started legal proceedings against Chen. The bank is
suing for $35.6 million plus costs and interest, according to
the court documents seen by Reuters.
Others to have launched legal proceedings include Standard
Bank Plc, CITIC Australia - a unit of Citic Resources
Holdings Ltd - and China's Shanxi Coal International
The exposure of foreign banks and various trading firms,
including CITIC and Mercuria Energy Trading SA, could amount to
more than $880 million, according to an aggregation of amounts
in company statements, reports and court documents.
"It's an evolving situation... and it's a complex
situation," Sands said.
(Reporting by Susan Thomas and Steve Slater; Editing by
Veronica Brown and David Holmes)