Qingdao Could Become Next Zhejiang; 17 Banks Have ￥15 Billion Exposed in Metals Financing

The copper market has moved on from Qingdao, but Chinese are still wondering how deep the problem goes. In Qingdao alone, metals financing reaches nearly ￥15 billion spread among 17 banks. The total is equivalent to 1.5% of total loans outstanding. Not a very large sum, but a credit bubble always ends with the marginal borrower first. As with the slowdown in the trust sector, this metals financing scandal will pull capital away from the riskiest borrowers. Credit continues to tighten.


17家银行148亿资金受拖累 监管层曾预警青岛港骗贷模式

China Qingdao Port constantly being fermented non-ferrous financing scam surfaced. Over the past few years, the field of finance widespread copper repeated pledge over financing and other games is not enough local banking practices in prevention are at the eve of bad debt crisis.

June 12th, 21st Century Business Herald reporter from a banking institution in Qingdao was informed that since the end of May the public security organs involved in the financing of fraud began to Qingdao Port, the local banking sector rapidly round of investigation.

An agency data show that at least 17 of Qingdao local banks involved in copper, aluminum and other nonferrous metals financing business, which 17 banks, including China Eximbank, the establishment of diplomatic five rows of workers and peasants, China, Minsheng, Societe Generale, investment, CITIC five medium-sized banks, also including Prudential, Qilu, Rizhao, Weihai, Weifang, Shandong and other local financial institutions, coupled with a remote city in Hebei banking firm.

Informed sources said 17 financial institutions involved in the financing amount Qingdao Port trade finance business in non-ferrous metals 14.8 billion yuan from top to bottom, including single-family Eximbank in 4 billion and down, accusing him of involving an amount of more than 1 billion are down.

"Lid finally opened." Qingdao local banks, a senior official said, the banks behind the financing of copper shadow banking chain well aware, "only after low tide, before we know who is swimming naked."

In the banking sector view, Qingdao is perhaps the next "Zhejiang", but, bad debt crisis in the banking system has become non-ferrous steel trade financing facility to convert from copper, aluminum and so on.

15 billion is a concept. 21st Century Business Herald data obtained from the local People's Bank, as of the end of the first quarter of 2014, the balance of Qingdao, foreign currency loans to 998.46 billion, of which the balance of the manufacturing sector loans 228 530 000 000; 15 billion is equivalent to the entire local financial institutions 1.5% of the loan balance, the balance of 6.5% in the manufacturing sector.

Qingdao Port nonferrous metals repercussions in the financial institutions financing fraud also caused the divergence. Next, the bank is bound to tighten credit financing, a thorough investigation of existing financing facilities of collateral, which will further exacerbate the bad debt exposure process.

Copper tricky areas such as finance and nothing new. Copper financing domestic commercial banks, the prevalence of three modes, one, the credit model, its path is import and export enterprises financing through domestic banks out of the deferred payment 90-180 days credit, the offshore spot copper imports to China Bonded Port , and then sell the copper traders.

But companies receive cash copper and resold it often takes less than 60 days, the time difference, for enterprises, is equivalent to a low-cost short-term financing.

In addition to the credit model, copper model of financing as well as warehouse receipts pledge and financing platform model. The former is the offshore spot copper imports to China bonded ports, bonded warehouses registered warrants further banks for dollar loans pledge of warehouse receipts, final projects and investments in high-yield assets, earn spreads; latter shall depend on another entity main industries.

Each of the three models are not mutually exclusive, letters of credit and the use of warehouse receipts pledge loan is often comic, which makes copper financing became a huge shadow banking black hole.

"Traders use of tying funding to get credit from the bank, and get the funds to invest in higher financial returns of real estate and local government financing platform to blow up the iron ore financing, financing copper foam." According to these bankers introduction, this is precisely the crux of the past few years the core of the steel trade, non-ferrous metals over the financing of lies.

Previously, under the CBRC trade finance had developed coastal provinces issued "on imported iron ore trade financing to carry out research quickly notice."

As early as the end of April, the CBRC supervision quarterly meeting, the China Banking Regulatory Commission had warning, "the steel industry trade violations financing model has been copied to sign the copper, coal, iron ore, soybeans and other commodities trade finance field."

Commodity trade finance risks for the first time and industries with excess capacity, and real estate financing platform tied to become the focus of regulatory agencies in the field of credit risk prevention.

For a number of foreign banks involved in financing scam Qingdao Port nonferrous metals foreign banks, including Standard Chartered Bank, had previously announced a halt for some Chinese metal financing business from new customers.

June 12, close to the local sources of foreign banks, foreign banks are actively prevent other cases of fermentation, pre-investigation and other customers.

Number of local banks also told reporters that the channel is considering legal action to preserve assets.