JPMorgan said Friday it is exiting the business of owning physical commodities, including electricity, oil and aluminum.

The announcement comes as the bank reportedly nears a settlement with the U.S. government over the manipulation of electricity markets in California.

JPMorgan (JPM)said it "is pursuing strategic alternatives for its physical commodities business...including, but not limited to: a sale, spin off or strategic partnership."

The move will not affect the bank's trading activities, such as the buying or selling of futures contracts.

Earlier this week, the Senate held a hearing on bank ownership of physical commodities, during which several witnesses said involvement from the big banks is dangerous for the financial system and may be driving up prices for consumers.

The hearing followed a story in the New York Times on Sunday alleging Goldman Sachs (GS) was stockpiling aluminum in Detroit, leading to higher prices for aluminum products like soda cans and cars.

People familiar with JPMorgan's involvement in California's electricity markets say the bank would bid to deliver electricity to a utility on a future day, and then raise the price, ensuring the power would not get bought.

Consumers would then have to compensate the bank for the cost of making the bid, under California's "make whole provision," which requires ratepayers to cover certain costs incurred by energy sellers.

It's not clear how JPMorgan made money on this arrangement, or if it was technically legal.

The government agency charged with policing electricity markets -- the Federal Energy Regulatory Commission -- and JPMorgan have declined to comment on the case.

Barclays and Deutsche Bank (DB) have also been recently fined by the government for improper electricity trading.