FIA defends bank participation in physical commodity markets
On Feb. 17 FIA submitted a letter to the Federal Reserve Board requesting more careful study before the regulator moves forward on proposed requirements that would restrict bank activities in physical commodities. FIA said that it continues to have significant concerns regarding any potential new restrictions on financial holding companies' physical commodities activities, including the physical settlement of commodity-linked swaps and other derivatives. FIA repeated that restrictions on those activities would likely impair competition and liquidity in physical commodities markets, undermine the critical intermediary, principal and financing role of banks in such markets. "We submit that any potential benefits of such restrictions do not outweigh these harmful market effects," FIA wrote.
