SINGAPORE (BLOOMBERG) – Societe Generale is closing its trade commodity finance unit in Singapore after the collapse of Hin Leong Trading prompted the bank to halt fresh funding to such firms in the region.

The bank is dismissing all front office staff dealing with transactions, while still keeping some administrative workers, people with knowledge of the matter said, asking not to be named because the matter is private.

Large Asian commodities trading clients with operations in Singapore will now be handled by Hong Kong, the people said. SocGen is cutting ties with Singapore-based small and medium commodities trading firms.

Earlier this year, SocGen was among more than 20 Singapore and international banks owed US$3.8 billion (S$5.2 billion) by oil trader Hin Leong, which filed for creditor protection after crude prices crashed. The French bank, which was owed US$240 million by the firm, later decided to freeze the allocation of new funds to oil traders in Asia-Pacific.

“Natural resources financing is one of Societe Generale’s core expertise,” the bank said in an emailed statement on Friday (July 31). “The bank is and will remain committed to the Trade Commodity Finance sector, including in Asia. Societe Generale continuously adapts its set up to better serve its global and local clients and leverages its presence and strengths in Asia to bring proximity and appropriate solutions to its clients.”

SocGen posted a surprise first quarter loss as the bank’s investment banking unit set aside 342 million euros ($556.2 million) for risky assets in the period, in part related to two fraud-related charges. SocGen didn’t identify the cases but said it may have to provision more over the remainder of the year.

Plummeting oil prices and rising bankruptcies are forcing French lenders to review their trade commodities financing activities. Earlier this month, Natixis said it was merging its infrastructure and commodities operations, in a move planned before the coronavirus crisis, but which was accelerated in recent months.

Banks were already pulling back from commodities in Asia before the chaos triggered by coronavirus. Over the past few years the industry has been rocked by a number of high-profile collapses and scandals, including multi-million dollar losses by some major Chinese and Japanese traders, and the spectacular downfall of Noble Group, one of the biggest names in the industry.

Trade finance is the lifeblood for the global commodity trading industry, which needs access to hundreds of billions of dollars to fund the buying, blending, storing and transporting of raw materials. Without access to short-term credit, traders’ businesses would all but collapse.

HSBC Holdings, the biggest bank creditor to Hin Leong, said it booked substantial loan loss provisions from an exposure to oil traders that amounted to US$2 billion in the first quarter. Dutch lender ABN Amro is the second largest creditor after HSBC, according to a draft copy of Hin Leong’s presentation for bank creditors earlier this year seen by Bloomberg News.

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