Deutsche Bank is one of the world’s leading players in food speculation. In public it denies that excessive speculation is one of the key drivers of recent food price spikes, but in private it has known it for years. Yesterday, German NGO Foodwatch pointed to Deutsche documents showing that the bank is fully aware of the impacts of excessive speculation on food prices and global hunger.
This case of corporate deception adds weight to the case for regulating the banks. Withdrawing from food speculation isn’t enough. Here’s why:
Profits before public interest
During the food price spikes of recent years, Deutsche was aware of the impacts that speculation can have on food prices. In 2009, a paper from the bank’s research department admitted, "Speculation has also contributed to price increases." A paper from the same department the following year pulled no punches about the impacts of having large positions distorting the market: "Such speculation can have grave consequences for farmers and consumers and is, in principle, unacceptable." Yet in spite of the warnings, the bank continued to speculate on food, and also helped other financial players to do so.
U-turning on food speculation
Following a high profile public campaign in Germany, Deutsche announced in March 2012 that it would put a moratorium on selling any new products based on food commodities. On the surface, this looked like it was a step in the right direction. However, in January 2013, Deutsche announced that its review had concluded that "There was no evidence that speculation was responsible for price developments."
We now know that this statement wasn't entirely true.
Again, without any rules, Deutsche can stop speculating on food on a whim but it can also resume once the public spotlight moves away.
Foodwatch’s exposé shows that what we really need is regulation which will prevent not just one bank but all banks in Europe from driving up food prices. Regulation will also ensure that banks can’t wriggle out of voluntary commitments once the media attention shifts elsewhere. So even though Barclays and BNP Paribas have recently announced that they are reducing their involvement in food speculation, we can’t celebrate just yet. The case of Deutsche Bank shows that we can’t rely on the banks to clamp down on food speculation. They need regulation.