StanChart Takes Provision for Suspected Qingdao Fraud

Posted by Michelle Howard
Wednesday, August 06, 2014

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 results.

"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 losses.

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 Energy Group.

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)

Maritime Reporter September 2014 Digital Edition
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