UPDATE 3-U.S. Senate hearing urges quicker commodity limits on banks

Wed Jan 15, 2014 6:50pm EST
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By Anna Louie Sussman

WASHINGTON Jan 15 (Reuters) - U.S. lawmakers at a Senate hearing on Wednesday pushed financial regulators to speed up efforts to limit Wall Street's role in physical commodities markets, pressing for a pivotal policy shift after a decade of deepening trade.

A day ahead of the hearing, the Federal Reserve laid out for the first time its growing concerns that risks to the financial system from banks leasing oil tankers or owning power plants are "difficult to limit and higher than expected."

It also raised concerns about serious conflicts of interest for banks.

The packed hearing, which lasted over an hour, offered senators a chance to delve further into the Fed's thinking, pressing Michael Gibson, its director of bank supervision and regulation, on why the central bank is not moving immediately to impose new rules.

"The Fed's proposal yesterday is a timid step, it was too slow in coming, and there is still too much that we do not know about these activities and investments," said Senator Sherrod Brown, who led the hearing.

Gibson told them that new restrictions are likely.

The panel also questioned whether banks should be forced to disclose more about the size and scope of their commodities activities and if banks' involvement in those markets has inflated the costs of key raw materials, such as aluminum.   Continued...