London, 17 February 2011

France's BNP Paribas increased commodity trading risk exposure in the fourth quarter of 2010 by 33 percent, after having scaled back in earlier quarters, the bank said on Thursday. France's biggest bank, in its announcement of quarterly results, reported average daily value-at-risk (VaR) in commodities trading had risen to 4 million euros ($5.4 million) in the fourth quarter from 3 million in the January-September quarter.

BNP Paribas was the latest European bank after Britain's Barclays Capital and Switzerland's Credit Suisse and to report an increase in commodity risk, while their U.S. counterparts continued to reduce their exposure. Societe Generale also said it had increased its commodities exposure in the fourth quarter but declined to disclose specific numbers.

VaR is a global measure for the maximum amount of money a bank could potentially lose in a day of trading in an asset class.

BNP Paribas missed forecasts for fourth-quarter profit on Thursday after booking a 534 million euro ($722.6 million) charge on the value of its stake in insurer AXA blaming the one-off on volatile stock markets.

Most banks pared their commodities risk exposure in 2009 and in most of 2010 to cope with tougher financial regulation, but the fourth quarter saw a turnaround among the European banks.

Since the financial crisis, calls for tougher financial oversight of Wall Street banks have resulted in a number of new regulations culminating in the Volcker Rule passed in July. The rule bars banks that operate in the United States from proprietary trading and from using more than 3 percent of their Tier 1 capital in private equity or hedge fund investments.

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Reporting by Patryk Wasilewski, editing by Jane Baird, Reuters - for Commodities Now.