CFTC cancels meeting on international swaps rules
WASHINGTON (Reuters) - The U.S. futures regulator called off a meeting on the overseas reach of U.S. swaps rules, as commissioners waged last-minute battles over how to apply them internationally without putting U.S. banks at a disadvantage, according to two people familiar with the matter.
Hours before a scheduled meeting on Thursday, the U.S. Commodity Futures Trading Commission canceled a public vote on guidance laying out the international reach of U.S. swaps rules and a proposal that would give overseas swaps players roughly an additional year to comply with some CFTC regulations.
The CFTC has said that relief would go to foreign banks that execute many trades with U.S. counterparties, and will therefore get tagged as "swap dealers". It would also cover the foreign operations of major U.S.-based swap players such as JPMorgan and Goldman Sachs, sources have told Reuters.
The cancellation of the meeting stemmed from negotiations between two Democratic commissioners over whether to further expand that relief to the domestic operations of U.S. banks, the two people familiar with the matter said on Thursday.
The U.S. banking industry fears the compliance delay for foreign swap dealers will shift that lucrative industry offshore.
A compromise was reached that would give U.S. banks until early 2013 to comply with some "entity level" requirements such as internal business conduct standards, a source said. But Republican commissioners requested more time to review and edit changes to the regime, the people familiar with the negotiations said.
The agency is likely to take a closed door vote on the measures in the coming weeks, they added, increasing the chances of unanimous approval of the measures.
"Commissioners requested additional time for consideration," CFTC spokesman Steve Adamske said in an email. He declined to comment further.
The CFTC was tasked by the 2010 Dodd Frank financial oversight law to write rules that boost transparency and limit risk in the $650 trillion global over-the-counter swaps market.
One of the thorniest issues is how far those rules should apply to foreign banks and the overseas operations of U.S. banks.
The banking industry has said an overly broad regime from the CFTC might duplicate or conflict with the rules of foreign regulators, or put certain banks at a competitive disadvantage.
But regulators are under renewed pressure to craft broad rules after JPMorgan's announced last month at least a $2 billion loss on a derivatives portfolio run out of its London office.
Risky derivatives trading at overseas subsidiaries of firms such as insurer American International Group Inc helped damage the U.S. financial system during the 2007-2009 financial crisis and led to multibillion-dollar taxpayer bailouts.
(Reporting By Alexandra Alper in Washington; and David Sheppard in New York; Editing by Gerald E. McCormick and Tim Dobbyn)
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