ABN Amro response re SOMO reports on impacts of commodities trading on food prices & right to food

Business & Human Rights Resource Centre invited ABN Amro to respond to the following items:

- Dutch financial institutions speculate in food markets, SOMO, 23 Dec 2011

- Food markets in Dutch: Dutch Banks and Pensions Funds in Agricultural Derivatives Markets, Rens van Tiburg, Dec 2011

- Feeding the Financial Hype: How excessive Financial Investments Impact Agricultural Derivatives Markets, Rens van Tilburg & Myriam Van der Stichele, SOMO, Nov 2011

ABN Amro sent the following response:

Amsterdam, 15 February 2012

ABN AMRO is a financial institution which provides financing and other financial services to clients who are active in the global food sector. We help our clients by offering financing, (price) risk mitigating instruments and transaction services. As such, we facilitate the smooth functioning of the food sector. We take our responsibility in the supply chain very seriously. We are in active dialogue with all of our clients and society on issues in the global food sector.

ABN AMRO acts as a broker – intermediary between buyer and seller- operating in Londen on Euronext LIFFE. ABN AMRO brokers about 6% of LIFFE’s daily volume and less than 5 % of that volume is related to commodity funds. We do not structure soft commodity derivatives. ABN AMRO holds no proprietary positions in commodity derivates.

From our Chicago office, a limited number of clients producing commodities are serviced in clearing and execution of their trades. Those clients use futures to cover their price risk. ABN AMRO does not offer financing to these clients. Clearing is no speculative activity: clearing and settlement are the risk reducing administrative processes through which performed trades are validated, delivered and (guaranteed) settled on an account.

ABN AMRO offers trading- and project financing. ABN AMRO provides financing during transportation (in case of commodities, the products can be physically transported from location A to B while financed by ABN AMRO). In addition, clients can pre-finance their commodities via the Bank.

ABN AMRO offers 985 Turbo’s of which 34 represent an underlying asset in commodities (< 1 %). Turbo’s are an investment product that give investors the opportunity to invest in underlying asset/ variables (e.g. stock, futures, commodity, currency, bonds, index) with extra leverage up or down. These 34 Turbo’s represent a total value of < 0.5 EUR million.

If there is common consensus that trading in commodities derivatives structurally causes volatility and higher commodities prices, and ABN AMRO’s services contributes in any way to this effect, ABN AMRO would reconsider its services.

Richard Kooloos, Head of Sustainable Development ABN AMRO