Presseaussendungen CEBS

The Committee of European Banking Supervisors (CEBS) today publishes a consultation paper on the risks arising from commodities business and from firms carrying out commodities business.

The report responds to the second part of a Call for Advice issued by the European Commission in August 2006 in which CEBS was invited to assess the prudential risks arising from the conduct of commodities business.

The Call for Advice is part of a larger review of the current provisions concerning commodities business and the prudential treatment of firms carrying out commodities business set out in the Directive 2004/39/EC on Markets in Financial Instruments (MiFID) and the Capital Requirements Directive (CRD, Directive 2006/48/EC and Directive 2006/49/EC).

The report is based on information provided by CEBS members and observers on the structure and regulatory coverage of their commodities markets as well as on information directly provided by market participants on their business, their risk structure and mitigants, their perception of the current regulatory framework and their concerns regarding any amendments to this framework.

The report concludes that at the market level the risks arising from commodities business and the risks in other financial markets (e.g. equity, FX, interest-rate) are generally the same and that these risks exist basically across all types of products (underlyings). In nearly all markets the majority of transactions are carried out OTC. Therefore, in the absence of the use of risk mitigation significant counterparty credit risk (CCR) arises. Other relevant risks identified are market risk, operational risk, legal risk and liquidity risk

Systemic risk crystallizes through contagion which is transmitted via market participants’ direct and indirect interdependencies. While the perceived interconnections may give rise to systemic risk concerns, their extent may depend on the size of the respective markets for commodities or exotic derivatives relative to the wider financial market or the related industry. Systemic risk concerns may vary widely across the different markets/underlyings and no generalization can be made.

The report also touches on the specifics of the commodities markets/business and their possible relevance to the prudential treatment of the variety of firms that are active in the commodities sector

CEBS invites all interested parties to discuss the findings of the risk assessment in an open discussion on 9 July 2007 (9.30-12.30), at the CEBS office in London and/or to send written comments on the consultation paper to the CEBS secretariat (commodities@c-ebs.org) by 27 July 2007. Due to the limited number of seats prior registration would be appreciated.

The consultation paper and the registration form for the hearing are posted on the CEBS website under: http://www.c-ebs.org/Consultation_papers/consultationpapers.htm and http://www.c-ebs.org/keydates.htm