FRB Proposes Enhanced Risk-Based Capital Requirements for Firms Engaged in Physical Commodity Activities

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;