New EU banking watchdogs could prevent future food riots

The World Development Movement (WDM) has said proposals to establish three new European banking regulators could help prevent food crises, as wheat price rises fuelled by financial speculation trigger bread riots in Mozambique.

WDM has been pushing for urgent action to prevent banks and hedge funds engaging in excessive speculation in food derivatives markets, which drove the 2006-2008 food price crisis [1] and is fuelling the recent wheat price spike. Wheat prices have rocketed nearly 70% since January, causing riots in Mozambique this week in which seven people have died.

Negotiators from the European Commission, European parliament and Council of Ministers yesterday agreed to establish the three watchdogs, which will include a European Securities and Markets Authority covering derivatives as well as other markets.

Deborah Doane, director of the World Development Movement said:

"The feeding frenzy on wheat derivatives is once again causing hunger and unrest in the world’s poorest countries. It is essential that we end the reckless speculation by big banks and hedge funds and return the food market to farmers and consumers. The birth of a new EU watchdog should make that possible.

"Mozambique is in the grip of a food emergency because the international price of grain is so high, despite strong harvests in many parts of the world. The extortionate price is artificial. It’s created by bankers, profiteering while ordinary people suffer.

"The new European Securities and Markets Authority needs to be given the power to regulate commodity markets. It should require that all commodities derivatives trades are cleared through transparent exchanges, ending the secretive nature of most 'over the counter' deals; and place strict limits on the amount of food derivative trades financial players like banks and hedge funds can undertake."

ENDS

Notes to editors

1. The World Development Movement report The Great Hunger Lottery examined the role of derivatives speculation in driving the 2006-2008 food crisis. It can be downloaded at http://www.wdm.org.uk/stop-bankers-betting-food-and-causing-hunger/briefings-and-reports