On February 20, APGA filed comments in response to a Notice of Proposed Rulemaking (NOPR) released by the Board of Governors of the Federal Reserve System addressing the physical commodity activities of Financial Holding Companies, which are large banks. The proposed rule is intended to strengthen existing requirements and place limitations on the physical commodity activities of financial holding companies. As communicated by the Federal Reserve, the intent of the proposal is to help reduce the catastrophic, legal, reputational, and financial risks that physical commodity activities pose to financial holding companies.
The proposed rule would: require firms to hold additional capital in connection with activities involving commodities for which existing laws would impose liability if the commodity were released into the environment; tighten the quantitative limit on the amount of physical commodity trading activity firms may conduct; rescind authorizations that allow firms to engage in physical commodity activities involving power plants; remove copper from the list of precious metals that all bank holding companies are permitted to own and store; and, establish new public reporting requirements on the nature and extent of firms’ physical commodity holdings and activities.
APGA’s comments focus on the potential impact the NOPR would have on natural gas prepays given the role that the Financial Holding Companies play as counterparties in these transactions. The comments also communicate that natural gas prepays “have provided significant benefits to public gas systems and their customers across the United States for over 20 years.” Lastly, the comments refer to an APGA Policy Resolution approved in 2014 that expresses APGA opposition to “the implementation of regulations that would prohibit, or inappropriately restrict, Financial Holding Companies from engaging in physical natural gas commodity transactions.”
A copy of the comments referenced in this article is available on the APGA website at
www.apga.org. For questions on this article, please contact Dave Schryver of APGA staff by phone at 202-464-0835 or by email at
dschryver@apga.org.