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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 down...
All material subject to strictly enforced copyright laws. ©
Euromoney Institutional Investor PLC.
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