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Fed takes aim at banks’ commodity holdings

Joe Mont | September 26, 2016

The Federal Reserve Board has opened public comment on a proposed rule intended to strengthen existing requirements and limitations on the physical commodity activities of financial holding companies.

The proposal “would help reduce the catastrophic, legal, reputational, and financial risks that physical commodity activities pose to financial holding companies,” the Board says in a statement.

A limited number of firms supervised by the Fed engage in physical commodity activities and investments. Some firms are permitted by law to engage in a broad range of physical commodity activities, including the extraction, storage, and transportation of commodities. Others may engage in more limited activities, including commodities trading. “The possibility of an environmental accident due to these activities presents significant risks to the firms,” the proposal says.

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