Senate Subcommittee on Investigations Releases Report on Bank Involvement with Physical Commodities
Commentary by Scott Cammarn
The Senate Homeland Security and Governmental Affairs Committee's Permanent Subcommittee on Investigations published a majority and minority staff report titled "Wall Street Bank Involvement with Physical Commodities." The report was released in conjunction with hearings, which are scheduled for November 20-21, 2014, regarding the physical commodities activities of bank holding companies.
The report focuses on the role of banks and bank holding companies in the physical markets for commodities and related businesses. It presents case studies of the three largest U.S. bank holding company participants in physical commodities over the last 10 years.
See: Permanent Subcommittee on Investigations Report on Wall Street Bank Involvement with Physical Commodities.
See also: Bank Involvement with Physical Commodities Hearing – Day One Agenda; Hearing – Day Two Agenda.
Related news: Senate Subcommittee on Investigations to Hold Hearing on Bank Ownership of Physical Commodities (November 10, 2014).
Commentary
Although the Senate Permanent Subcommittee is recommending a number of changes, it is not suggesting that financial holding companies should be denied physical commodities trading authority altogether. Rather, the Subcommittee is recommending that certain ancillary activities (particularly activities that are engaged in under merchant banking or grandfathering theories) should be limited, and that the Federal Reserve tighten standards applicable to financial holding companies that are or seek to be engaged in physical commodities trading.