US senators call for tighter rules on banks in physical commodities

US regulators should reduce exemptions that allow banks to own warehouses, consider banning exchange-traded funds in physical commodities and issue clear limits on financial holding companies’ physical commodity activities, a bipartisan group of US senators has recommended.

In a report entitled “Wall Street involvement with physical commodities”, the permanent subcommittee on investigations laid out its findings and made 11 recommendations to the Federal Reserve and the US Commodities Futures Trading Commission (CFTC). The recommendations come as the same senators’ committee holds a hearing on the role of banks in physical commodities in Washington DC. Under the Bank Holding Company Act’s merchant banking authority, banks such as Goldman Sachs, JP Morgan and Morgan Stanley are required to sell activities involving physical commodities within ten years of the investment date. The same authority grants a 15-year holding period for investments in private equity funds, and the Fed may approve a longer...


Andrea Hotter

November 20, 2014

14:48 GMT

New York