The Federal Reserve (Fed)’s point person for bank regulation said Friday that it would review gaps in its regulation of commodity operations of the largest banks and new rules would be written.

Fed Governor: New rules on Big Bank Commodity Ownership to be written in 2015

Speaking at a Senate investigative subcommittee, Fed Governor Daniel Tarullo said the bank regulator would be looking into filling gaps and would write new rules on banks’ commodity holdings by the first quarter of 2015.

Fed Governor Pledges New Rules On Big Bank Commodity Ownership

When questioned by Senate subcommittee Chairman Carl Levin (D-MI) Fed regulation of banks holding commodities, Tarullo responded that “It may be worthwhile taking a look at those merchant banking guidelines for all activities, not just commodities.”

In prepared testimony Tarullo noted concerns about bank safety as a result of their ownership of large commodity positions. “Just the uncertainty that can come about after a catastrophic event as observers wait to see the ultimate damages could put extraordinary pressure on a financial institution engaged in these activities that could threaten its safety and soundness,” he said.

Fed Governor discusses metals manipulation

A significant concern was that much of the metals manipulation discussed in the hearing took place on the London Metals Exchange (LME) and was regulated in the U.K., not by the U.S. Commodity Futures Trading Commission. Tarullo said he plans to meet with the CFTC on the issue.

In 2013, before he retired, then Commissioner Bart Chilton had requested information from the New York Federal Reserve for an investigation that was being conducted about commodity manipulation, but he was rebuffed in even obtaining information. “The main issue is I don’t know what commodities large traders own,” Chilton said at the time.

“I’m a CFTC Commissioner and I’ve been trying to find out what the banks own in the way of commodities and I can’t tell you what their positions are. I’ve been trying to find out from the Federal Reserve, which has this information, since the end of July 2013. I’ve asked the Federal Reserve to send me a list, give me a link to the information they have. I receive links but they go to nowhere where I can see the information. The links go to orders that approve Federal Reserve requests for ownership, but don’t detail their commodities ownership. My concern is the Federal Reserve isn’t providing commodity regulators this information. The American people should have visibility into this issue.”

It appears like the issue is now being addressed. While Tarullo sounded like definative plans were being made, others were skeptical, however. “There will be a lot of sound and fury, but it won’t amount to much in the long term,” Craig Pirrong, a finance professor at the University of Houston, was quoted as saying in a Reuters report.