On March 4, the European Central Bank (“ECB”) published an opinion on the European Commission’s legislative proposal for a Regulation amending the Capital Requirements Regulation (CRR) to extend certain exemptions for commodity dealers. The opinion is a response to a request made by the Council of the European Union on January 12, 2016.
The ECB stated that it had not identified any concrete indications of systemic risk created by commodity dealers that would make it strictly necessary to remove the exemption for requirements concerning large exposures and own funds that apply at present. The EBA explained that given commodity dealers active in Europe are generally less leveraged and have more resilient capital structures than banks. However, the ECB regards a detailed impact analysis as a necessary step in terms of taking the most appropriate decision regarding the removal or the temporary extension of the exemption. In particular, consideration should be given to level playing-field issues relative to credit institutions which trade in commodities.
The ECB believes that the exemption should be of a temporary nature given the European Commission is expected to present a proposal for a comprehensive review of the prudential regulation of investment firms. Opinion.