Reuters reported that France's BNP Paribas increased commodity trading risk exposure in the fourth quarter of 2010 by 33%, after having scaled back in earlier quarters.

France's biggest bank, in its announcement of quarterly results, reported average daily value at risk in commodities trading had risen to EUR 4 million in the fourth quarter from EUR 3 million in January to September 2010 quarter.

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 was the latest European bank after Britain's Barclays and Switzerland's Credit Suisse and UBS to report an increase in commodity risk, while their US 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.

BNP Paribas missed forecasts for fourth quarter profit after booking a EUR 534 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 2010.

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.

(Sourced from www.reuters.com)