The US Federal Reserve wants to put new limits on big banks’ activities in physical commodities businesses, with an eye to reducing financial risks from volatile trading and transport of sensitive materials.
The Fed’s governors are proposing restrictions for banks’ holding, transporting and trading of commodities like oil, aluminum and coal. Banks would be required to beef up the capital they hold against potential losses in commodities and would face limits on the amount of their commodities trading.
The Fed is opening the proposal to public comment for 90 days.
Wall Street banks have sharply reduced their involvement in physical commodities in recent years, under pressure from regulators and lawmakers. The biggest players in the field have been Goldman Sachs Group Inc and Morgan Stanley.
Regulators say disasters like the massive 2010 oil spill in the Gulf of Mexico show the potential risks to banks. Though that accident only affected BP PLC and the oil-service companies involved, banks that engage in transport of oil in tankers could take heavy financial hits, the regulators say.
Also, critics of Wall Street say that owning and storing commodities like aluminum in warehouses or oil in storage tankers enables banks to drive up prices for basic products made from them — like gasoline, canned soft drinks and beer, and electricity.
“As a general matter, [major banks] should be prohibited from owning physical assets like warehouses, pipelines and tankers,” Democratic US senators Sherrod Brown of Ohio and Elizabeth Warren of Massachusetts have told the Fed.
Business interests say they are concerned about the Fed’s proposal. Reducing the number of players in commodities markets by forcing out banks could raise costs for businesses that use the commodities and need to hedge against price swings, the US Chamber of Commerce said.
There could be less money sloshing around in the financial markets, making it harder for the businesses to make trades for hedging, Chamber executive Tom Quaadman said in a statement. The Fed should have done a “robust economic analysis” of the proposal, he said.
The proposed new requirements would mean banks would have to salt away a total of up to US$4 billion in additional capital, Fed officials estimate.
In addition, banks would no longer be allowed to engage in physical activities involving power plants. Banks no longer could own and store copper, because regulators now deem copper to be an industrial metal, rather than a precious metal like gold and silver.
Nvidia Corp CEO Jensen Huang (黃仁勳) is expected to miss the inauguration of US president-elect Donald Trump on Monday, bucking a trend among high-profile US technology leaders. Huang is visiting East Asia this week, as he typically does around the time of the Lunar New Year, a person familiar with the situation said. He has never previously attended a US presidential inauguration, said the person, who asked not to be identified, because the plans have not been announced. That makes Nvidia an exception among the most valuable technology companies, most of which are sending cofounders or CEOs to the event. That includes
TARIFF TRADE-OFF: Machinery exports to China dropped after Beijing ended its tariff reductions in June, while potential new tariffs fueled ‘front-loaded’ orders to the US The nation’s machinery exports to the US amounted to US$7.19 billion last year, surpassing the US$6.86 billion to China to become the largest export destination for the local machinery industry, the Taiwan Association of Machinery Industry (TAMI, 台灣機械公會) said in a report on Jan. 10. It came as some manufacturers brought forward or “front-loaded” US-bound shipments as required by customers ahead of potential tariffs imposed by the new US administration, the association said. During his campaign, US president-elect Donald Trump threatened tariffs of as high as 60 percent on Chinese goods and 10 percent to 20 percent on imports from other countries.
Taiwanese manufacturers have a chance to play a key role in the humanoid robot supply chain, Tongtai Machine and Tool Co (東台精機) chairman Yen Jui-hsiung (嚴瑞雄) said yesterday. That is because Taiwanese companies are capable of making key parts needed for humanoid robots to move, such as harmonic drives and planetary gearboxes, Yen said. This ability to produce these key elements could help Taiwanese manufacturers “become part of the US supply chain,” he added. Yen made the remarks a day after Nvidia Corp cofounder and chief executive officer Jensen Huang (黃仁勳) said his company and Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) are jointly
United Microelectronics Corp (UMC, 聯電) expects its addressable market to grow by a low single-digit percentage this year, lower than the overall foundry industry’s 15 percent expansion and the global semiconductor industry’s 10 percent growth, the contract chipmaker said yesterday after reporting the worst profit in four-and-a-half years in the fourth quarter of last year. Growth would be fueled by demand for artificial intelligence (AI) servers, a moderate recovery in consumer electronics and an increase in semiconductor content, UMC said. “UMC’s goal is to outgrow our addressable market while maintaining our structural profitability,” UMC copresident Jason Wang (王石) told an online earnings
RSS