The Committee of European Banking Supervisors (CEBS) has published an assessment of the prudential risks arising from the conduct of commodities business and the activities of firms carrying out commodities business (the Report). The Report responds to the second part of a Call for Advice issued by the European Commission in August 2006 and concludes CEBS technical advice on the review of commodities business under Article 48 of Directive 2006/49/EC.
In the Report CEBS concludes:
- At market level the risk arising from commodities business and the risks in other financial markets are generally the same and that these risks basically exist across all types of products.
- In nearly all markets the majority of transactions are for varying reasons carried out OTC and despite the use of risk mitigation techniques significant counterparty credit risks remain.