Banks fight back with warning over withdrawal from commodity markets

The withdrawal of US banks from commodity markets will have a detrimental effect on market liquidity, increase volatility and leave consumers, producers and traders heavily exposed to fluctuations in commodity prices, according to a new report commissioned by a banking lobby group.

The Securities Industry and Financial Markets Assn (Sifma) commissioned IHS to examine the role of banks in physical commodities following several far-reaching investigations by US lawmakers and regulators into banks’ ownership of assets, including power stations and metals warehouses.
JP Morgan announced plans to sell its physical commodities business in July, shortly after it paid $410 million to settle charges of alleged price manipulation in Californian and Mid-Western wholesale electricity markets.
Goldman Sachs, meanwhile, has been served with several class-action lawsuits accusing it of hoarding aluminium at its Metro warehouses in Detroit, driving regional premiums up in the process.
The bank is understood to have explored opportunities to sell the non-core Metro business earlier in the year.

The possible departure of JP...

Published

Mark Burton

September 19, 2013

17:28 GMT

London