News 27.05.2013

DZ Bank and Union Investment: exit from food speculation and call for strict regulation of soft-commodity markets

The DZ Bank and its subsidiary cooperative fund company Union Investment are withdrawing completely from food speculation business. This was confirmed by DZ Bank in its role as the central institute of the cooperative banks in a letter to consumer organisation foodwatch.

In a letter dated 13 May 2013, DZ Bank CEO Lars Hille also called for strict regulation of the soft-commodity markets, in particular “through the introduction of effective position limits on stock exchanges or central clearing platforms”. Such position limits would – as demanded by foodwatch – limit the number of contracts traded on the commodity futures markets and prevent excessive speculation. In order to also establish trading volume limits of this type for trades outside of the stock exchange, known as “over-the-counter” trading (OTC), DZ Bank CEO Hille also called for measures to increase transparency: “We encourage every effort to have derivatives such as futures contracts on soft commodities traded for the most part over stock exchanges or, in the case of OTC derivatives, over central clearing platforms in order to provide more transparency and reduce counterparty risk.”

 foodwatch director Thilo Bode explained: “Next please! DZ Bank’s exit marks the departure of another major bank from the dreadful business of food speculation. DZ Bank’s decision is a demonstration of social responsibility, in particular because the bank is also campaigning for the necessary government regulation of soft-commodity futures markets. The kind of control over trading volumes demanded by DZ Bank through effective position limits is a fundamental prerequisite for preventing excessive speculation and the resultant famines. This is an example for other institutions that go to great lengths to hinder the political regulation of financial markets – especially Deutsche Bank.”

Since the publication of the foodwatch report “The Hunger-Makers” in October 2011, foodwatch has demanded that banks cease all speculative trading with soft commodities in order to eliminate the risk of speculation-related food price spikes. With Commerzbank, Landesbank Baden-Württemberg (LBBW), Landesbank Berlin (LBB), DekaBank of the Sparkassen and now DZ Bank and Union Investment, the list of banks abandoning food speculation is getting longer and longer. On the other hand, Deutsche Bank, Germany’s largest player in this field, announced their decision at the start of the year to continue distributing products that speculate on the price development of soft commodities.

 DZ Bank and Union Investment had already announced in January that they would cease the active distribution of products that are based on soft-commodity pricing changes “until further notice”. In a face-to-face meeting with foodwatch director Thilo Bode, DZ Bank’s CEO Lars Hille explained the decision in detail, which he confirmed in a letter to foodwatch on 13 May. In this letter, DZ Bank announced that it would let securities based on soft commodities mature in 2013. Successor products would not be issued, nor would soft-commodity derivatives from other banks be distributed. Products without a maturity date have already been withdrawn from the stock exchange or notice of termination has been issued to clients with effect from 3 June. Furthermore,

DZ Bank’s own “Akzent Invest Fonds Best Portfolio” has been moved to another index without soft commodities. The products of subsidiary Union Investment will also not make any use of soft-commodity prices in the future. DZ Bank serves as the central institution for the more than 900 Volksbanken banks, Raiffeisen banks, Sparda banks and PSD banks. In Germany, DZ Bank is the fourth-largest bank after Deutsche Bank, Commerzbank and the public-law bank Kreditanstalt für Wiederaufbau (KfW).

[NoTranslation for en]