CEBS 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 concludes that at the market level the risks arising from commodities business and the risks in other financial markets are generally the same and that these risks exist basically across all types of products. In nearly all markets the majority of transactions are carried out OTC. Therefore, despite the use of risk mitigation techniques, significant CCR remains and needs to be appropriately managed.
Systemic risk crystallizes through contagion which is transmitted via market participants’ direct and indirect interdependencies. Systemic risk concerns may vary widely across the different markets/underlyings and no generalization can be made.
The report also touches on the specifics of the commodities markets/business and their possible relevance to the prudential treatment of the variety of firms that are active in the commodities sector.
Press release
Risks assessment report
Annex 1
Annex 2
Annex 3
Annex 4
Annex 5
© Graham Bishop
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