Reuters: Regulatory News: UPDATE 1-Big commodity houses may pose new risks -Bank of Canada

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UPDATE 1-Big commodity houses may pose new risks -Bank of Canada Sep 25th 2012, 18:55 Tue Sep 25, 2012 2:55pm EDT * Says commodity houses could become systemically important * Lane makes no mention of monetary policy in speech By Scott Haggett CALGARY, Sept 25 (Reuters) - Large commodity trading houses, together with the physical trading operations of big investment banks, are playing an increasingly prominent role in commodity markets and may become systemically important, Bank of Canada Deputy Governor Timothy Lane said on Tuesday. In prepared remarks that made no reference to monetary policy, Lane said it was worth asking whether the losses a trading house incurs, or the failure of a house altogether, would have a significant knock-on effect on the financial system as a whole. "Just as the 2008 financial crisis revealed the need to assess the systemic importance of institutions that play a central role in particular financial markets, we should be asking the same questions about institutions that are interconnected with various commodity markets," Lane said in prepared remarks for a speech in Calgary. Global regulators are imposing stricter rules on the banking industry to avoid a repeat of the 2008 financial crisis. These include a tougher set of standards for banks designated systemically important, or "too big to fail", meaning their collapse would imperil the broader industry. While regulators have so far focused on banks considered systemically important for the global industry, they are now turning their sights to lenders considered key to national industries. In the United States, the Federal Reserve allows banks to trade physical commodities, but there are heavy restrictions on them owning underlying assets such as pipelines and refineries. Link this Share this Digg this Email Reprints

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