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Commodity banking faces French retreat
19 December 2011
Regulatory demands and the high cost of dollar funding for key European banks are transforming the commodity financing market. Dickon Harris assesses what 2012 will hold for commodity borrowers.
Read more:
Commodity trade finance
French banks
Commodity finance
eurozone crisis
commodity finance borrowers
trading companies
traders
Commodity financing, traditionally dominated by the larger European banks, is in a state of flux as the end of 2011 approaches. The commodity market has been hit by both the European Commission’s compulsory recapitalisation plans combined with the relatively high-cost of dollar funding for a number of European lenders.
These twin pressures have already caused significant pricing increases since September but fundamentally they are forcing the market to arrange more tightly structured transactions. Ultimately European banking constraints are allowing a new set of trade banks to enter into the commodity market.
As Trade France Magazine goes to press, the European Banking Authority (EBA) has stated that that the region’s banks must find a114.7 billion ($150 billion) of extra capital to ensure they can withstand the continuing eurozone debt crisis. The result is that many banks have been selling loans and risk-weighted assets feverishly since September. As one source at...
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