“Wall Street banks — and the trade groups and law firms that represent them — are challenging the Federal Reserve Board’s basis for restricting ties banks have to physical commodities, arguing it is fundamentally flawed.
“The central bank is worried that bank holding companies could potentially face significant legal liabilities if physical commodities they are tied to, such as oil tankers and natural gas pipelines, are part of an environmental disaster.
“But the largest banks that have not yet been chased away from the business are pushing back hard against the Fed’s analysis, saying existing law is sufficient to protect banks from any potential fallout.
“The vast body of law that has been enacted to deter and address environmental damages provides the basis for developing a framework that market participants may and do utilize to substantially reduce the risk of liability or otherwise mitigate it,” John Rogers, executive vice president and chief of staff at Goldman Sachs, wrote in an April 16 letter to the Fed.”
Read full American Banker article here.