Banks continue to feel pain on Commodity loan deal in China David Gustin - September 30, 2014 2:52 AM | Categories: Trade & Commodity Finance | Tags: Citi, Decheng Mining, Fraud With all the hoopla surrounding frothy valuations for einvoicing vendors, bear in mind one thing – when you touch an approved invoice, you are playing in a much easier sandbox. The credit world gets incredibly more complicated after that. Let’s look at what is going on with the continued saga of Decheng Mining, which fraudulently pledged metal stored at a Chinese port using falsified warehouse receipts for multiple loans. These were not just Chinese banks they were fooling mind you, but global financial institutions like HSBC and Citi. Goldman Sachs estimates commodity based lending in China took in $110 billion of foreign currency into China over the last 4 years. That’s right, $110 billion. How much of that was fraudulent. Who knows? But you have to question the underwriting done on these deals. How can banks effectively ensure collateral is not pledged multiple times? Perhaps the time for some universal central registry ala the SWIFT’s KYC registry would help. But I digress. What makes this very relevant is the global banking community is involved. Standard Chartered, HSBC, Citi, Glencore, and Trafigura are some of the names mentioned. Banks should know better. My friends at GTR news laid this out nicely in their article “Whale Watching”. According to the article, “it’s estimated that international institutions are likely to incur combined losses of more than US $1 billion. Media reports in China suggest Decheng owes Chinese banks upward of US $2.5 billion.” As I pointed out on the Tesco accounting irregularities, I would bet more is yet to come. see Tesco investigated for improper Rebate Accounting Shameful for those who don’t do their homework. Related Articles How Large Commodity companies use Finance to gain Advantage Commodity finance being done by Trading Houses Visibility, Risk, and the Recent China Metals Fraud Commodity Trade Finance – Still the Banks’ Domain Discuss this: Cancel reply Your email address will not be published. Required fields are marked *Comment Name * Email * Website Notify me of new posts by email.