The Board of Governors of the Federal Reserve System requested comments on a proposal to enhance risk-based capital requirements on financial holding companies engaged in activities related to physical commodities and merchant banking investments. The proposal would require firms to hold additional capital in connection with physical commodity activities, including the extraction, storage, and transportation of commodities.
In particular, the proposal would:
- adopt additional limitations on physical commodity trading activities conducted by financial holding companies under complementary authority granted pursuant to Section 4(k) of the Bank Holding Company Act and clarify certain existing limitations on those activities;
- amend the Board's risk-based capital requirements to better reflect the risks associated with a financial holding company's physical commodity activities;
- rescind the findings underlying the Board's orders authorizing certain financial holding companies to engage in energy management services and energy tolling;
- remove copper from the list of precious metals that all bank holding companies are permitted to own and store as an activity closely related to banking; and
- increase transparency regarding physical commodity activities of financial holding companies through more comprehensive regulatory reporting.
Comments on the proposal must be submitted by December 22, 2016.
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