Fanya Collapse Could Embroil Banks

FT: China protests over Fanya liquidity freeze could spread to banks
Online notices indicate the products were marketed through Bank of China branches in Aksu, Xinjiang, and in Hangzhou, a prosperous city in the Yangtze Delta. The products were also marketed through other banks, according to material from Fanya Metal Exchange’s website and former salespeople.

Chinese bank branches will sometimes handle deposits for unaffiliated financial products or allow them to be marketed on premises without officially endorsing them. Former salespeople for Fanya investment products described the banks as third-party custodians.

That distinction is not always clear to retail investors. In some past cases when wealth management products gone awry, regulators have insisted that the bank accept some responsibility. Bank of China declined to comment.

The Fanya Metal Exchange’s use of normal banking channels to market its products could mean its troubles have broader systemic effects, if banks are held responsible by regulators.

“We can’t comment on Fanya because they are not under our jurisdiction,” the Yunnan securities regulator said on Tuesday. Asked about the redacted report, the regulator said it was “normal information release by us”.

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