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BANKS: A love-hate relationship with commodities
August 08, 2014 - 12:00 GMT
Banks have had a chequered involvement in commodities over the years, and have much to mull over as the race to expand in the market begins once again.
When grain merchants in sixth-century Lombardy began issuing
loans to farmers in return for a share of future crop
production, they were laying the foundations of the modern
banking system. By also accepting readily marketable
commodities such as gold as collateral for those loans, and
later issuing money backed by that collateral, the Lombardy
merchants were building a framework for the
world’s first private and central banks, as
Randall Guynn, a lawyer at Davis Polk who represents many of
the world’s leading merchant banks and
broker-dealers, told the US Senate Banking Committee last year.
For as long as banks have existed, they have been active in
physical commodities markets, Guynn told the committee. But
just as Guynn was called before the Senate to justify their
longstanding presence in those markets, some of the
world’s largest investment banks were announcing
plans to scale back their commodities businesses or close them
All material subject to strictly enforced copyright laws. ©
Euromoney Institutional Investor PLC.
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