BKM302700 - Bank loss restriction: definition of banking company: excluded entities – commodities and emission allowance dealers

Commodities firms are excluded entities for the purpose of the bank loss restriction. Commodities firms include commodity and emission allowance dealers and firms which only carries on relevant regulated activities for the purpose of trading in commodities or commodities derivatives.

Commodity and emission allowance dealers

Commodity and emission allowance dealers are firms that are exempt fromcertain provisions of the Investment Firms Prudential Regime. A company is a commodity and emission allowance dealer it meets the definition in the FCA Handbook

Commodity trading

A company not otherwise excluded as an ‘commodity and emission allowance dealer’ is also an excluded entity if its only line of business is to carry on relevant regulated activities for the purpose of trading in commodities or commodity derivatives.

This exclusion also applies if a company carries on a second line of business, which is not deposit taking and the company’s activities in that line of business would not, on their own, result in it being an FCA investment firm that meets the conditions in CTA10/S269B(6B) if it only carried on this second line of business.

HM Revenue and Customs view hedging transactions undertaken in respect of commodities trades as being undertaken for the purposes of the commodity trading.