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Goldman talking sale of metals warehouse unit: Source

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Goldman Sachs plans to resume talks with parties interested in buying its metals warehousing business now that new exchange rules have been released, a source familiar with the matter said Monday.

The talks with potential buyers, which are largely firms based outside the United States, are not part of a formal sales process, the source said.

Metro International Trading Services, which stores aluminium and other metals as part of the London Metal Exchange warehouse system, has been at the center of a controversy around Wall Street's ownership of physical commodity assets.

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That controversy heated up after the bank was accused of boosting wait times and prices for metals consumers, including makers of drink cans and cars.

More than a dozen parties have expressed an interest in buying the business, according to the Financial Times, which first reported the talks Monday.

The paper said several of the potential buyers were Chinese firms, including China Minmetals and Chinese insurer Ping An. Brazilian bank Grupo BTG Pactual is also actively looking at warehouse assets, trade and industry sources say.

Goldman considered a possible sale of Metro earlier this year but put those efforts on hold while the London Metal Exchange reviewed the rules governing warehouses. The exchange earlier this month proposed new rules to crack down on the wait times for metals delivery, providing more clarity for warehouse owners.

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The Federal Reserve announced a review of Wall Street's role in physical commodities trading in July. Goldman has recently insisted it remains committed to its commodities businesses even as rivals, including JPMorgan, have announced they are selling assets and exiting physical trading.

Fed Vice Chairman Janet Yellen, speaking last week at a Senate hearing on her nomination to become chairman of the central bank, said for the first time that the Fed may create new rules as part of its review.

Regulatory and legal experts say the most likely target is the banks' direct ownership of warehouses, power plants, oil storage tanks and other infrastructure.

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Goldman has said that Metro was bought under a "private equity exemption'' that would allow the bank to own the business for up to 10 years as long as it operates at arm's length from its commodities traders.

Fed-regulated banks are generally barred from owning physical assets such as warehouses and pipelines, but Goldman Sachs and Morgan Stanley have said they have the right to retain businesses they operated prior to converting to commercial banks at the peak of the financial crisis.

The bank bought Metro in 2010 for around $500 million.

—By Reuters.

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