(Bloomberg) -- A group representing the world’s top banking regulators warns that some cash-strapped commodities traders are hedging less since last year’s unprecedented market turmoil — a strategy may leave them more vulnerable if prices spike again.

After investigating the ructions in global commodities markets following Russia’s invasion of Ukraine, the Financial Stability Board said the widespread use of leverage left some physical traders facing liquidity stress as prices jumped. The board’s members include the Federal Reserve and the European Central Bank.

The upheaval in energy, metals and agriculture markets sparked calls for closer regulatory scrutiny of the roles that physical traders play and the risks they pose to the global financial system. Last year, the FSB said the huge margin calls that traders faced warranted particular attention.

The agency said Monday that — with the exception of nickel — the commodities markets continued functioning as prices surged. But the group flagged ongoing concerns about traders’ extensive use of leverage and called for monitoring of the sector’s ability to withstand further bouts of volatility.

“The purported cutting back of hedging activity, and a possible reduction in the quality of hedges, have likely increased market risks in the commodities sector,” the report said. “This could reduce the resilience of commodity traders’ and producers’ balance sheets as they could become more exposed to losses from fluctuations in commodities prices.”

While prices have retreated sharply during the past year, some traders in Europe appear to have been cutting back their hedging activity in an effort to reduce the amount of collateral they need to backstop their trades, the group said.

Some also have migrated away from exchange-traded contracts in favor of cheaper over-the-counter derivatives.

The FSB also said its investigation had been hampered by a lack of reliable data on some key functions of the commodities markets, such as trading in OTC derivatives and the precise funding needs of large physical traders. The panel called on relevant authorities to make better use of existing data and consider ways to address the underlying opacity of the markets.

The report also offered insight into corners of the industry that are notoriously hard to probe, including the extent of banks’ activities in the markets. Goldman Sachs Group Inc., JPMorgan Chase & Co., BNP Paribas SA, Morgan Stanley and Societe Generale SA were identified as key dealers in oil, natural gas and wheat, alongside specialist commodities brokerages Marex Group Plc and ADM Investor Services.

In an analysis of about a dozen large trading houses, the FSB said Trafigura Group had an asset-to-equity ratio that was more than double most of its peers and had the second-highest reliance on short-term debt after agricultural trading house GrainCorp Ltd.

“While physical commodity trading is a balance sheet intensive activity, commodities traders often choose to keep little liquidity,” the FSB said.

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