Financial Trade Associations Statement on Fed’s Proposed Rule on Physical Commodities and Merchant Banking Activities

Published on:
September 23, 2016

Release Date: September 23, 2016

Contact: Carol Danko [email protected](SIFMA)
Jeff Sigmund, [email protected](ABA)
William Goodwin, [email protected](IIB)
Sean Oblack, [email protected] (TCH)

Financial Trade Associations Statement on Fed’s Proposed Rule on Physical Commodities and Merchant Banking Activities

Washington, D.C., September 23, 2016 – In response to the Federal Reserve’s proposed rule to increase capital requirements on merchant banking and physical commodities activities and investments, SIFMA, American Bankers Association, Institute of International Bankers and The Clearing House released the following joint statement:

“While we are still digesting the proposal on physical commodities and merchant banking issued by the Federal Reserve today, it is both inappropriate and unfortunate that it has proposed regulatory changes that are based upon wholly theoretical and unsubstantiated concerns, rather than actual facts, evidence, or historical experience. More than 100 end-users have either submitted or joined other letters attesting that financial holding companies produce substantial public benefits including lower prices and greater market liquidity. By imposing unjustifiably higher capital on this important economic activity, end-users will ultimately pay the price, burdening business and hindering job creation, the formation of new businesses and economic growth.

“As with the report released two weeks ago by the Federal Reserve under Section 620 of Dodd-Frank, these recommendations are unjustified and would directly thwart Congress’s clearly expressed intent to permit these activities. The Federal Reserve’s proposal has been made without pointing to any evidence that these activities have increased risk within the industry and without a cost-benefit analysis of their impact. Furthermore, the proposal ignores the core tenet of American corporate law, and is inconsistent with the Federal Reserve’s and other regulators’ historical views in this area.”

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