Exclusive-Credit Agricole CIB chooses carbon trade over gold, Reuters sources say

By Polina Devitt

LONDON (Reuters) – France’s second-largest listed bank Credit Agricole ( OTC: ) has decided to replace precious metals with trading in regulated carbon markets from 2025, three sources with knowledge of the matter told Reuters.

The move signals the growing appeal of the world’s most valuable carbon market – the EU’s Emissions Trading System (ETS) – for European banks.

“Credit Agricole is exiting precious metals, managing existing risks and letting book positions disappear,” one of the sources said. “The bank is instead looking to focus on carbon markets with a view to starting trading next year,” the source said, adding that management was looking to align the move to the carbon market with Credit Agricole’s “green ambitions”.

Both Credit Agricole and Credit Agricole CIB, the French bank’s corporate and investment banking arm, declined to comment.

The value of global traded markets for carbon dioxide permits will reach a record 881 billion euros ($949 billion) in 2023, according to LSEG analysts. The EU ETS accounted for 87% of the global total – €770 billion.

The decision will not affect the precious metals market as Credit Agricole CIB’s business – mainly trading precious metals derivatives for clients – is small compared to the industry giants.

The bank, the sources said, has been gradually reducing its presence there since it was hit when the pandemic disrupted the gold market four years ago.

Flight restrictions and the shutdown of precious metals refineries in early 2020 have raised concerns that traders will not be able to move gold to the United States in time to deliver futures contracts.

As a result, gold and silver prices in London and New York have diverged sharply, leading to high exchange demand for physical material futures (EFP), which allow traders to trade gold or positions to and from the physical metal and extreme volatility of EFP premiums. .

Many banks were able to weather the storm as they did not cut positions, opting to wait for the price gap to normalize.

Credit Agricole chose to close its positions and realize the loss, two of the sources said, without disclosing the size of the position or the loss.

The bank’s precious metals business, according to one of the sources, was earning several tens of millions of dollars a year before 2020. For comparison, global gold trading volumes were estimated by the World Gold Council at $241 billion a day in August.

“They tried to get the business going again two years ago, but it never really got off the ground, unfortunately,” another source said. “Then the decision was made to transfer the balance to new markets, such as carbon, to help increase revenue.”