Monday, October 10, 2011

Sec. Geithner Wearing FSOC Chair Hat Responds to House Concerns on Coordinating Dodd-Frank Derivatives Regulations

In a letter to House Financial Services Committee Chair Spencer Bachus (R-Ala), Treasury Secretary Geithner assured the Chairman that federal financial regulators are implementing the Dodd-Frank Act consistently with the President’s recent Executive Orders by coordinating and streamlining regulations across agencies. Speaking as Chair of the Financial Stability Oversight Council, the Secretary said that the Council will and should play a coordinating role to achieve the greatest consistency of regulation across agencies as possible. He pledged to seek ideas from Council Members, including the Chairs of the SEC and CFTC, on concrete ways in which their agencies can use the Council as a vehicle to improve coordination.

The Secretary also promised going forward to make it a top priority to encourage inter-agency coordination and the development of rules that strike the right balance between financial stability and innovation. As FSOC Chair, he pledged to also foster the development of regulations that work together and avoid unnecessary overlap. In his view, these efforts should minimize duplicative compliance efforts and promote an innovative and competitive financial system that is essential to economic growth and job creation.

Earlier this year, the President issued an Executive Order directing executive agencies other than independent agencies like the SEC and CFTC to develop a plan to review and streamline regulations where possible. In the Executive Order, the President emphasized the importance of regulations balancing protection of the public with promoting economic growth, innovation, competitiveness, and job creation. Secretary Geithner said that he sent a letter to FSOC Members such as the SEC and CFTC encouraging them to adopt the principles and guidelines of the Executive Order. In July, a second Executive Order was issued reinforcing the importance of these issues and encouraging independent regulatory agencies such as the SEC and CFTC to follow the key provisions of the earlier Executive Order.

In an earlier letter to Treasury and at congressional hearings, Chairman Bachus has asked what is being done to coordinate the implementation of derivatives regulations both in the US and with non-US regulators and how to ensure that no implementation gaps will contribute to competitive disparities. Addressing the Treasury Secretary in his capacity as Chair of the Financial Stability Oversight Council, Chairman Bachus has asked what is being done to ensure that the SEC and CFTC will consistently implement Title VII derivatives regulations.

The Committee has been increasingly concerned that the SEC and CFTC are not properly coordinating the adoption of regulations to implement the Title VII derivatives provisions of the Dodd-Frank Act. Earlier, Capital Markets Subcommittee Chair Scott Garrett (R-NJ) sent a letter to CFTC Chair Gary Gensler stating that Title VII rules are being proposed by the SEC and CFTC without apparent coordination.