On October 10, the Committee of European Banking Supervisors (CEBS) published its report on prudential risks that may arise from the conduct of commodities business and the activities of firms carrying out commodities business.
CEBS concludes that the risks present in commodities business is broadly in line with the risks present in other financial markets and that they are generally the same across all types of underlying assets. As the majority of transactions are carried out OTC, significant risks still remain in commodities business and those risks need to be appropriately managed. The report highlights that interconnections between firms carrying on commodities business has increased the perception of systemic risk. The exact extent of any systemic risk will depend on the size of the respective markets for commodities relative to the wider financial market and may vary widely across different markets.