Citigroup pushed forward on a series of ill-fated metal financing deals in China despite internal warnings about the risks, leaving it exposed to losses that could take a big bite out of its growing commodities business.

Senior executives at Citi were wary of an internal proposal first made in 2011 that it start lending to clients using metals stored in Chinese warehouses as collateral, people familiar with the discussions said. The bank still decided to enter China's booming metal-financing market in 2012 and quickly expanded its lending to certain key clients.