Barclays to Close Commodities Business as Tougher Rules Bite

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Barclays to Close Commodities Business as Tougher Rules Bite

Barclays Plc has said it will halt most of its commodities trading ventures, joining a wide exit by banks as earnings fall in the wake of tougher rules.

The exit of the UK bank brings to three the number of top banks that have substantially cut or shuttered their investments in natural resource trading since last summer, with profits being hurt by regulatory requirements that the financial institutions keep more capital reserves to cushion them against any financial crisis.

“This decision is in line with Barclays’s stated objective to actively evaluate and manage our businesses, ensuring they meet strict economic and strategic criteria within the new regulatory environment,” the bank said in a statement as reported by the Wall Street Journal.

The bank added that the move wouldn’t substantially affect its financial results.

Barclays said it’ll be closing its trading in base metals, energy and agriculture. However, the lender retains trading in precious metals, some gas and oil products and index commodities. It said the downsized business would be carried out electronically.

The lender has not disclosed the number of employees from a workforce of 160 in sections such as trading, sales and research of commodities’ businesses that will be affected.

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Among the largest banks in commodities, only Goldman and Morgan Stanley are yet to exit the trading. Several banks have dropped their commodities ambitions.

For now, Barclay’s commodities trading will include provision of hedging for wheat farmers or steel manufacturers. It will also facilitate speculative trading on coffee from Brazil, according to Reuters.

A person familiar with the latest developments said that Barclays will continue to run a London-based vault, in which it keeps precious metals such as gold and rhodium.

The financial institution has not commented on the businesses it’s targeting for closure or selling. Chief executive Antony Jenkins is expected to announce a wider restructuring plan on May 8. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com