Feb. 11 (Bloomberg) -- Federal Reserve Chairman Janet Yellen pledged that the regulator will make changes in its oversight of banks’ role in the commodities business, which has attracted regulatory and lawmaker scrutiny.
“The Federal Reserve’s main focus in our supervision of these areas is to make sure that banks operate in the commodities activities in a safe and sound manner,” Yellen said at a House Financial Services hearing today.
The Federal Reserve announced on Jan. 14 that it was seeking comments on the risks posed by bank ownership and trading of commodities, such as oil, gas and aluminum and the possible benefits of imposing additional capital standards on such activities. Comments are due by March 15.
The Fed’s review of banks’ commodities activities followed Congressional inquiries, including from Senators Sherrod Brown of Ohio and Carl Levin of Michigan, into possible conflicts of interest and manipulation in those markets. JPMorgan Chase & Co. and Morgan Stanley have announced plans to sell portions of their commodities business.
Soliciting comment doesn’t bind the Fed to issuing a rule at a later date. The central bank has issued such preliminary notices before, including for a credit-ratings rule in 2010 and capital rules in 2003. After gathering outside views, the Fed could propose a rule that would be open for further comments before the central bank issues a final version.
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