WASHINGTON (dpa-AFX) - Citing the risks posed by physical commodity activities, the Federal Reserve has proposed new regulations to strengthen existing requirements and limitations on the commodity activities of financial holding companies.
The proposed rule unveiled by the Fed on Friday would tighten the quantitative limit on the amount of physical commodity trading activity firms may conduct.
Firms would also be required to hold additional capital in connection with activities involving commodities for which existing laws would impose liability if the commodity were released into the environment.
The Fed said the proposed rule would also rescind authorizations allowing firms to engage in physical commodity activities involving power plants and remove copper from the list of precious metals that all bank holding companies are permitted to own and store.
Additionally, the rule would establish new public reporting requirements on the nature and extent of firms' physical commodity holdings and activities.
The Fed said it invited public comment on the proposed rule, which will be accepted for 90 days after publication in the Federal Register.
According to the Wall Street Journal, the rules would likely hit Goldman Sachs Group Inc. (GS) the hardest, as most other banks have done more to pull out of such businesses.
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