Chatham Financial Testifies Before the House Financial Services Committee Hearing on OTC Derivatives Legislation

Chatham Financial Testifies Before the House Financial Services Committee
Hearing on OTC Derivatives Legislation

KENNETT SQUARE, Pa., Oct. 8 /PRNewswire/ -- Chatham Financial, the largest
independent interest rate and foreign exchange risk management advisor,
testified before the House Financial Services Committee hearing on derivatives
legislation. Chatham was invited by the Committee as an independent expert to
testify as a representative of business end users who use derivatives to
reduce their interest rate, foreign currency and commodity price risk.
Chatham's Chief Operating Officer, Dave Hall, testified on the merits and
concerns in the currently drafted legislation released Friday by Chairman
Barney Frank and the House Financial Services Committee.

The drafted legislation released last Friday recognizes and differentiates
business end users from large financial institutions. Specifically, this draft
focuses central clearing requirements on large market participants rather than
on business end users. It also precludes those who use OTC derivatives to
prudently manage risk from being subject to higher regulatory thresholds under
the definition of major swap participant.

Mr. Hall told the committee, "It is an honor and great responsibility to
participate in this hearing," and "given the events in the financial markets
in recent years, we applaud the Administration and Congress for considering
appropriate changes to our financial regulatory framework, including the area
of derivatives."

In today's testimony Chatham presented five recommendations for improvement to
this draft legislation:

1. The first change is to exclude business end users from any margin
requirement. "We think that any requirement for business end users to
cash collateralize hedging transactions would create an extraordinary
and
unnecessarily drain on working capital," testified Mr. Hall.
2. Second, Chatham stated that this draft should be clarified regarding
capital charges so that regulators are instructed to set capital
charges
based on historic or predicted loss, and not as a penalty to discourage
the use of OTC derivatives.
3. Third, this draft bill recognizes that systemically significant
institutions should be subject to higher standards than those that
cannot
impose systemic risk. However, as currently written, it is possible
that
non-systemically significant firms could be subject to the same
regulatory burden that applies to large financial institutions.
4. Fourth, Chatham states that the term "major swap participant" which is
broadly defined as those having a substantial net position, be defined
by
legislation versus by regulators which is how the legislation reads
today.

5. Finally, Chatham has recommended that this legislation grant regulators
the authority to provide exemptive relief where they deem necessary in
an
effort to address any of the unforeseen consequences that could result
from this historic legislation.

In addition to Chatham's testimony, the House Financial Services Committee
also heard testimony, as part of this proceeding, from CFTC Chairman Gensler,
SEC Director Hu and representatives from Cargill Inc., Ohio State University,
Prudential Financial, SIFMA, Managed Funds Association, Deere & Company,
Wholesale Markets Brokers Association and the Americans for Financial Reform.

Wednesday's testimony by Chatham is a continuation of their involvement with
end users to meet the Administrations objectives for regulation, without
causing unintended consequences for businesses actively using derivatives to
manage business risks. Over the last several months Chatham has evaluated and
commented on the proposals brought forth, and have educated end users on the
implications of each proposal. As part of this education effort Chatham
established a website, www.Hedgingworks.com to inform and educate the public
about the issues. According to Dave Hall, "Our goal is not to avoid
regulation but to help get it right. We will continue to make ourselves
available to our clients and our elected officials to assist in meeting this
goal."

About Chatham Financial
Chatham Financial is the largest independent interest rate and foreign
exchange risk management advisory company; serving clients in the areas of
interest rate and foreign currency hedging, hedge accounting (FAS 133/IAS 39),
capital and debt advisory, defeasance services, and debt and derivatives
valuations (FAS 157). Annually, Chatham advises more than 1,000 clients on
over 8,000 transactions and $350 billion notional from offices in the U.S.,
Europe and Asia. For more information, please visit www.ChathamFinancial.com
or to learn more regarding the legislative debate on OTC derivatives visit
www.HedgingWorks.com

SOURCE Chatham Financial

Sam Peterson of Chatham Financial, +1-484-731-0276,
speterson@chathamfinancial.com