Wall Street challenges U.S. regulator over proposed commodities rule – by Olivia Oran (Reuters U.S. – February 21, 2017)


Wall Street is pushing back against a proposed rule to force U.S. banks like Goldman Sachs Group Inc to hold more capital against investments in commodities, placing what some see as an overly restrictive limit on banks’ ties to the sector.

In a comment letter filed late on Friday and not yet made public, the industry argues the proposed rule would hurt the economy, and that fears about environmental risks from physical commodities activities are overblown.

The U.S. Federal Reserve handed down the proposal in September, after a public backlash stemming from the belief that big banks’ involvement in commodities markets hurt consumers by driving up prices. The comment letter, filed by the Securities Industry and Financial Markets Association and the Institution of International Bankers and seen by Reuters, comes as big banks face an uncertain future in Washington.

Even though President Donald Trump has said he favors deregulation and has hired several Wall Street executives as advisers, it is unclear how he or the new Congress will approach various rules.

Apart from Goldman Sachs, few banks have large exposure to physical commodities any longer. At one time, it was a big and lucrative business for both Goldman and Morgan Stanley, due to a quirk in their regulatory structure. Other banks, including JPMorgan Chase & Co, eventually plunged into the business as well, but exited as global capital requirements got more onerous, making such investments too costly to maintain.

For the rest of this article, click here: http://www.reuters.com/article/us-usa-banks-regulation-commodities-idUSKBN16028B