Banks cut commodity VAR as regulatory reform bites

Sheet metal

Higher capital requirements and regulatory reform are causing banks to dramatically curb their risk-taking in commodity and energy markets, according to market participants.

The value-at-risk figures reported by banks between the first quarter of 2011 and the second quarter of 2012 underline a trend of lower risk-taking in commodity and energy derivatives. Eight out of 11 major dealers surveyed by Energy Risk saw a drop in value-at-risk for their commodities businesses during this period.