U.S. deepens scrutiny of banks' roles in commodities

(Reuters) - Wall Street banks face the prospect of increased scrutiny of their commodity businesses as U.S. regulators and lawmakers on Tuesday pressed for a closer look at their roles in owning warehouses and in trading everything from oil to metals

Under pressure from a handful of lawmakers to explain why banks including JPMorgan Chase & Co. and Goldman Sachs have been allowed to own warehouses and trade physical commodities, regulators have scrambled this month to demonstrate that they are tackling the issue.

On Tuesday, Securities and Exchange Commission Chairwoman Mary Jo White said for the first time that the SEC was looking into the question of insider trading, a concept that has never been formally applied to the broad commodity markets.

Meanwhile a leading lawmaker called on the Commodity Futures Trading Commission (CFTC) to explain what kind of oversight it had of metals warehouses within the London Metals Exchange (LME) network, many now owned by big banks and traders. Metals users testified before a Senate panel last week that the owners are driving up costs by moving slowly to deliver the metal.

The scrutiny of banks' commodity desks, which has been apparent since last year, abruptly intensified this month, raising the possibility that banks may have to spin off or shut down their multibillion-dollar operations.

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