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Commodity ownership by banks eyed, Fed says

07/22/2013 @ 7:54am

The Federal Reserve said late Friday it is reviewing a decade-old decision that allowed banks to move into the physical-commodity business, amid increasing regulatory focus on bank participation in markets ranging from electricity to metals warehousing.

A Senate committee next week is scheduled to hear testimony from major metal consumers including an executive from MillerCoors LLC detailing complaints that wait-times and costs for metals held in bank-owned warehouses have skyrocketed. MillerCoors is a joint venture of SABMiller PLC and Molson Coors Brewing Co.

Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. both bought metals warehousing companies in 2010. Both are exploring sales of the units amid challenging business conditions and increased regulation, according to people familiar with the matter.

The Fed and banks are nearing a broad deadline later this year on the extent to which banks will be permitted to continue to own and operate physical commodity assets. The Fed granted temporary waivers to some banks throughout the 2000s allowing them to own the assets, circumventing decades-old prohibitions on bank ownership of commercial assets. The Fed's statement raises the possibility that it could reverse its prior decisions, in whole or in part.

The Fed has previously declined comment on the deliberations. But in a statement Friday, a spokeswoman said: "The Federal Reserve regularly monitors the commodity activities of supervised firms and is reviewing the 2003 determination that certain commodity activities are complementary to financial activities and thus permissible for bank holding companies."

Write to Christian Berthelsen at christian.berthelsen@wsj.com

(END) Dow Jones Newswires

July 19, 2013 18:40 ET (22:40 GMT)

DJ Fed Reviewing Decision Allowing Banks to Move Into Physical-Commodity Business->copyright

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