Fed urged to address risks associated with bank ownership of physical commodities

This story appeared in Bank Digest.

Senators Sherrod Brown (D-Ohio) and Elizabeth Warren (D-Mass) have urged the Federal Reserve Board to address risks associated with financial holding companies' ownership of physical commodities. As the Fed closes the public comment period on its advanced notice of a proposed rulemaking, the senators recommended that it prohibit financial holding companies (FHCs) from owning physical assets. In a letter to the Fed, the senators outlined concerns associated with FHCs' expansion into activities that are commercial in nature, particularly their ownership of assets involved in the extraction, transportation, storage, and distribution of commodities and energy. They argued that commercial commodities and energy activities expose financial institutions, regulated by the Fed, to unprecedented and unmanageable financial, legal, environmental, and reputational risks.