UPDATE 1-China blames foreign banks for derivatives losses

viernes 4 de diciembre de 2009 07:20 CET

(Adds detail, reaction from banks)

BEIJING Dec 4 (Reuters) - A senior Chinese government official has blamed some of the leading foreign banks for designing complex financial products that triggered losses by state-owned enterprises last year.

Writing in the official Study Times journal, Li Wei, deputy director of the State-Owned Assets Supervision and Administration Commission (SASAC), said 68 Chinese firms suffered net losses of 11.4 billion yuan ($1.67 billion) on call and put options signed with foreign banks.

He blamed Goldman Sachs (GS.N: Cotización), Citigroup (C.N: Cotización), Merrill Lynch, Morgan Stanley (MS.N: Cotización) and other international banks for providing "extremely complicated" and difficult to understand derivatives products.

While SASAC, which manages China's big state-owned compnies, has previously blamed foreign banks for derivatives losses, this is the first time it has put a number to the size of losses or named banks involved.

Goldman Sachs, Merrill Lynch and Citigroup all declined to comment when contacted by Reuters on Friday. Morgan Stanley did not reply to a request for comment.

Li said China Eastern Air Holding Company, China National Aviation Holding Company and Cosco Group were among the firms that made the losses after the price of oil fell below the exercise prices of the options.

He said by the end of October, the three companies lost 16.1 billion yuan through derivatives trading conducted from June to August. The losses increased to 19.9 billion yuan by the end of the year.

"After the global financial crisis, people mostly think of the United States and other western countries when talking of 'high leverage to derivatives products', but there are also domestic enterprises that have been deeply affected," Li said.   Continuación...