LONDON, Sept 16 (Askume) – France’s second-largest listed bank Credit Agricole (CAGR.PA) has decided to replace precious metals in regulated carbon market trading from 2025, three people familiar with the matter told Askume.
The move signals the growing appeal of the world’s most valuable carbon market, the EU’s emissions trading system (ETS), to European banks.
“Credit Agricole is exiting precious metals as it manages existing risks and reduces its book positions,” one source said.
“The bank instead wants to focus on carbon markets with a view to starting trading next year,” the source said. He added that management wants to align the carbon market initiative with Credit Agricole’s “green ambitions.”
Credit Agricole and Credit Agricole CIB, the corporate and investment banking unit of Credit Agricole, both declined to comment.
According to LSEG analysts , the global carbon dioxide emissions authorisation market transaction value will reach a record high of 881 billion euros ($949 billion) by 2023. The EU’s carbon emissions trading system accounts for 87% of the global total – 770 billion euros.
The decision will have no impact on precious metals markets because Credit Agricole’s business, which mainly trades precious metals-related derivatives for clients, is small compared to the industry giants.
The bank has been gradually reducing its local presence since the gold market was hit by the pandemic four years ago, sources said.
Flight restrictions and precious metals refinery closures in early 2020 raised concerns that traders would be unable to move gold to the United States in time for delivery of futures contracts.
As a result, gold and silver prices in London and New York diverged sharply, leading to high demand for futures-to-physical (EFP), which allows traders to swap gold or silver futures positions with the physical metal and lead to huge fluctuations in gold and silver.
Many banks were able to weather the storm because they did not reduce their positions but instead chose to wait until spreads normalized.
Credit Agricole decided to close the position and realise the loss, two sources said, without disclosing the size of the position or the losses.
One source said the bank’s precious metals business was earning hundreds of millions of dollars per year by 2020.
“They tried to revive the business two years ago but unfortunately never succeeded,” another source said, adding that the decision was then made to shift the balance sheet into new markets such as carbon to help boost revenue.
