US gives foreign banks more time on swap rules

Monday, 24 December 2012 00:00 - - {{hitsCtrl.values.hits}}

Reuters: The top U.S. derivatives regulator on Friday gave foreign banks more time to meet new derivative trading rules that had earlier sparked fears that international financial markets could pull away from U.S. banks.

The Commodity Futures Trading Commission (CFTC) said that foreign banks now had until July 12, 2013, to comply with the rules and said it would continue to fine tune the regulations that have also drawn the wrath of foreign regulators.

“The relief period provides time for the Commission to work with foreign regulators as they implement comparable requirements,” CFTC Chairman Gary Gensler said in a statement.

Countries worldwide are drawing up rules for the $650 trillion swaps industry to mend flaws brought to light by the 2007-09 financial crisis, bringing trading onto regulated platforms and making data public. The CFTC had been facing a year-end deadline by which it needed to decide how its rules apply overseas or delay them. It had drawn flak from regulators in Asia and Europe about the blunt way it imposed its rules on banks abroad.

The delay is “very much an interim process to buy everyone a little bit of time,” said Gareth Old, a lawyer at Clifford Chance in New York.

It will “allow the coordination between regulators, and permit the dealers and their counterparties to adapt to the changes that are going to be coming into place,” he added.

Non-U.S. regulators are saying they are already working on similar rules as the U.S. agency, and the potential doubling up of the rules has sparked fears foreign banks could stop trading with U.S. counterparties.

When an earlier deadline loomed in October, several European banks ordered their brokers to rein in and even quit trading some derivatives with U.S.-based peers, in a protest against the tough new American rules.

“It is important that the CFTC continue to provide relief to avoid confusion in the market, like that market participants experienced on and around October 12th,” the Securities Industry and Financial Markets Association (SIFMA) banking lobby said.