The bank will dispose of its European power and gas inventory and close contracts through a formal sale process, he said.
The firm is following Deutsche Bank and Morgan Stanley in shutting some units trading commodities as prices tracked by Standard & Poor’s last year had their first annual drop since 2008 and electricity prices in Germany slumped 16%. The Federal Reserve is reviewing banks’ control of raw-material assets and regulators are demanding they increase reserves to cover potential losses.
'It’s a snowball effect', said Gary Hornby, a European power and gas market specialist at Inenco Group in St. Annes, England, which advices energy buyers including East Midlands Trains. 'Less banks mean less volatility and then more banks pull out of these markets as opportunities dry up'.
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