Wednesday, May 04, 2011

Securities and Banking Industries Support Legislation Extending Deadline for Dodd-Frank Derivatives Regulations

In letters to Congress, the securities and banking industries expressed strong support for legislation that would extend the implementation of the Dodd-Frank derivatives regime by 18 months, which would provide the SEC and CFTC and market participants alike the opportunity to continue thoughtful consideration of the costs, benefits, and potential market impact of the proposed regulations under Title VII.

SIFMA believes that the current July 21, 2011 deadline for the derivatives section of Dodd-Frank rulemaking does not provide adequate time for the SEC and CFTC to consider the critical issues related to this new regulatory system for over the counter derivatives markets. In SIFMA's view, the legislation would provide additional time for regulators to draft rules, conduct additional cost-benefit analysis and consider the cumulative impacts of these rules on the market and how they would affect businesses and consumers. We applaud the Agriculture Committee for recognizing the need for regulators and the industry to get these new rules right and for passing this legislation.”

In its letter, the American Bankers Association said that the additional time would enable the SEC and CFTC and the industry to continue meaningful dialogue on the proposed mosaic of rules.

Developing the framework for regulating the swaps market has been an enormous undertaking. The SEC and CFTC have now proposed rules in almost every area required to implement the mandate for transparency and disclosure in the swaps market. So banks and other market participants now have some understanding of the regulators’ respective views about how the market will operate in the future. However, the CFTC and the SEC have been working under tight statutory deadlines to draft these rule
proposals. The ABA is concerned that they have not had sufficient time to do thorough cost-benefit analyses and to carefully consider the interconnected sequencing and implementation of these rules. They are also concerned that banks and other market participants have not had sufficient time to consider the impact on their businesses and provide as much meaningful input as they would like in the process. It is also is critical that the regulatory implementation not, however unintentionally, provide incentives for banks and other market participants to move offshore.

HR 1573, introduced by House Agriculture Committee Chairman Frank Lucas (R-OK), would extend the statutory deadline until
December 2012, and in doing so would align the timeframe for swaps reporting and central clearing in the United States and the G20. This should provide an important opportunity for regulators around the globe to harmonize their rules and thereby reduce the incentive for business to shift overseas based on real or perceived differences in international regulatory regimes.

The ABA also supports the provisions in H.R. 1573 that would authorize the CFTC and the SEC to exempt certain persons from some of the regulatory requirements if they already are subject to supervision and regulation. In the rush to establish an appropriate framework for regulating the swaps market, said the ABA, no one should not lose sight of the fact that imposing duplicative and potentially contradictory regulatory requirements could be harmful to the market.