Regulators’ rules ‘too weak’ to tackle speculation on food

International financial regulators have called today for tighter controls on financial speculation in commodity markets, but anti-poverty campaigners the World Development Movement have branded the regulators’ rules as ‘too weak’, saying they will not tackle the growing hunger and poverty caused by speculation on food prices.

The International Organisation of Securities Commissions (IOSCO), representing regulators from 115 countries, has recommended rules to control the amounts that traders such as investment banks and other financial players can hold in commodity markets.

The Pope, the UN Food and Agriculture Organisation and the UN special rapporteur on the right to food and are among those who have blamed financial speculation in commodity markets for contributing to spiralling global food prices. The prices of basic foods such as wheat have jumped by over 30 per cent in the past year, while rising prices pushed 44 million people into extreme poverty in the last six months of 2010 alone.

The World Development Movement, while welcoming the regulators’ view that controls are urgently needed, has said that the degree of flexibility in the rules recommended by IOSCO could make them ineffective.

World Development Movement spokesperson Murray Worthy said today:

The international financial regulators have now added their voices to those of countless others, including the UN, calling for tougher controls of agricultural commodity markets. But the recommendations do almost nothing to tackle the reckless speculation by banks and hedge funds that has overwhelmed these markets.

Clear, hard rules are needed to limit banks’ speculation if we are to prevent them driving food prices beyond the reach of the world’s poorest people. Today’s recommendations from the regulators are too weak to do that.”

The World Development Movement’s report, ‘Broken Markets’, released on Tuesday, argues for strict controls on speculation. European proposals to regulate commodity markets are expected to be announced this autumn, but the UK government is set to block the regulations.[1] The G20 finance ministers are also to discuss new rules to regulate commodity markets in their meeting next month.

Murray Worthy continued:

These proposals should only be seen as a first step. Europe, the G20 and particularly the UK government must go further to introduce clear limits to tackle excessive speculation by banks and other financial speculators.”

Note to editors

1. Proposals to introduce new rules to regulate food speculation are expected in the European Commission’s review of its Markets in Financial Instruments Directive (MiFID), due to be published in October 2011.