Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Commodities
Search
Home
World
Companies
Markets
fastFT
Alphaville
FTfm
Markets Data
Trading Room
Equities
Currencies
Capital Mkts
Commodities
Emerging Markets
Tools
Global Economy
Lex
Comment
Management
Life & Arts
November 19, 2014 10:00 pm
Bloomberg
More
ON THIS STORY
Oil price swings come too late for banks who made desk cutbacks
Sign up now
FirstFT is our new essential daily email briefing of the best stories from across the web
Imagine if BP had been a bank, said senator John McCain, the senior
Republican on the subcommittee. The liability from the oil spill would have
led to its failure, leading to another taxpayer bailout.
A 2012 Federal Reserve of New York commodities team review found that the
three banks and a fourth unnamed financial group had shortfalls of up to
$15bn to cover extreme loss scenarios, the report said. The Fed is
considering restricting banks physical commodity activities.
In addition to potential environmental disasters, the subcommittee said the
banks ownership or investments in physical commodity businesses gave them
inside knowledge that allowed them to benefit financially through market
manipulation or unfair trading advantages.
Executives of the three banks will defend their businesses in testimony on
Thursday before the subcommittee. The banks say they play a crucial market
making role for clients by providing financing, liquidity and hedging
capabilities, while also reducing market volatility.
They also argue that they are not liable for environmental disasters, as that
responsibility lies with the owner or operator of the resources or facilities.
The subcommittees review of Goldman Sachs focused on its Nufcor unit that
trades non-enriched uranium, Metro International Trade Services, a network
of metals warehouses in Detroit, and its coal operations. The bank is in the
process of winding down Nufcor and is selling Metro.
$15bn
Estimated maximum shortfall among four financial groups to cover extreme loss
scenarios
In two deals reviewed by the subcommittee, 6,500 trips were made within the
Metro system. Customers such as the brewer MillerCoors, which uses
aluminium in beer cans, claimed the logjams inflated raw materials costs by
billions of dollars. Warehouse owners disputed this.
Gross fair value of physical commodity trading inventories
2009
2010
2011
2012
2013
Goldman
Sachs
$3.7bn
$13.1bn
$5.8bn
$11.7bn
$4.6bn
JPMorgan
$10.0bn
$21.0bn
$26.0bn
$16.2bn
$10.2bn
Morgan
Stanley
$5.3bn
$6.8bn
$9.7bn
$7.3bn
$3.3bn
Source: Consolidated Financial Statements for Bank Holding Companies, FR Y-9C Reports, Schedule HCD, Item M.9.a.(2).
Goldman Sachs also disputed the claims, saying that the owners of the
aluminium direct the moves of those resources from one warehouse to the
other, not the bank. It added that the owners, who are usually hedge funds or
other investment firms, are often taking advantage of different rules
governing the warehouses to reap financial gains.
Goldman said it makes investments in metals but it has strict conflict of
interest policies regarding those businesses and separation from other parts of
the bank.
Goldman Sachs did not engage in improper merry-go-round transactions,
it said. Metro always complied with owner instructions as to the movement of
metal, its activities complied with LME [London Metals Exchange] rules and
did not impact the cost that Americans pay for cans of beer.
The Morgan Stanley case study was based on its natural gas activities, and oil
storage and transport businesses. Until recently, the bank controlled over 55m
barrels of oil storage capacity, 100 oil tankers and 6,000 miles of pipeline, the
report said.
Morgan Stanleys involvement in oil and gas rivalled that of all giant oil and
gas companies, Mr Levin said.
Morgan Stanleys involvement in oil and gas rivalled that of all giant oil and
gas companies
- Carl Levin
Tweet this quote
More than 30 power plants owned by JPMorgan, and its copper activities and
trades were also studied by the subcommittee. Last year, JPMorgan had to pay
a $410m penalty to settle with the Federal Energy Regulatory Commission,
which accused the bank of manipulating energy markets at the expense of
consumers.
JPMorgan said it had sold a large portion of its physical commodities business
and going forward, it will focus those activities on financial derivatives. The
bank added that its commodities business followed all regulations and it also
had a strong risk management programme.
In its report, the subcommittee also criticised regulators for taking insufficient
action to rein in the banks commodity businesses. Federal Reserve governor
Dan Tarullo, who heads regulatory policy, is scheduled to testify in front of the
Senate on Friday.
RELATED TOPICS
US banks,
Federal Reserve USA,
Goldman Sachs Group Inc,
JPMorgan Chase & Co
Copyright The Financial Times Limited 2014. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.
Gift Article
Share
Clip
Reprints
Email
Gift Article
Share
Clip
Reprints
Print
Email
MARKETS DATA
Energy
Metals
Agriculture
Brent Crude
78.17 +0.09%
WTI Crude
RBOB Gasoline
74.73 +0.20%
2.04 -0.04%
Natural Gas
Heating Oil
4.42 +1.12%
2.37 +0.32%
VIDEOS
NEWS BY EMAIL
Sign up for email briefings to stay up to date on topics you are interested in
MOST POPULAR
Read
Commented
Videos
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Search
Waterway Manager
Canal River Trust
Director of Finance
Creative Education Academies Trust
Video
Blogs
Podcasts
Interactive graphics
Audio slideshows
Picture slideshows
Tools
Portfolio
Topics
FT Lexicon
FT clippings
Currency converter
MBA rankings
Newslines
Today's newspaper
FT press cuttings
FT ePaper
Economic calendar
Services
Subscriptions
Corporate subscriptions
Education subscriptions
Syndication
Conferences
Annual reports
Executive job search
Non-Executive Directors' Club
Businesses for sale
Contracts & tenders
Analyst research
PropertySales.com
RSS feeds
Quick links
FT Live
How to spend it
Social Media hub
The Banker
The Banker Database
fDi Intelligence
fDi Markets
Professional Wealth Management
This is Africa
Investors Chronicle
MandateWire
FTChinese.com
Pensions Expert
New York Institute of Finance
ExecSense
ASEAN Confidential
China Confidential
LATAM Confidential
Updates
Alerts Hub
Daily briefings
FT on Facebook
FT on Twitter
FT on your mobile
Company announcements
Share prices on your phone
Contact us
About us
Privacy policy
Copyright
Cookie policy
THE FINANCIAL TIMES LTD 2014 FT and 'Financial Times' are trademarks of The Financial Times
Help
Ltd.
Clip