FOCUS: Latest warehouse scandal tightens credit as banks turn even more cautious

The latest warehouse fraud – in which around 20 Access World nickel receipts were illegally copied to raise cash – has started to make conditions even harder for metals traders looking for fresh finance, sources told Metal Bulletin.

Banks, which are treading more cautiously because of the heightened perception of risk, have put stricter controls in place before agreeing to issue letters of credit or enter any sale and repurchase agreements (widely referred to as repos), those sources said.
“Some banks don’t want to finance metal stored in Access World any more and instead of asking ten questions they are asking 30 before any deal can happen,” a trading source said.
Credit availability had already tightened after the Qingdao scandal in 2014 in China alerted finance providers of the risk of multiple pledging of warehouse receipts to secure bank loans.
In this latest instance, the fraud is more contained and no nickel has physically left warehouses. Still, large sums of money are involved – at least $110 million and possibly as much as $200 million, according to well-informed sources.

As with Qingdao, the banks that agreed to provide...

Published

Perrine Faye

March 07, 2017

17:06 GMT

London