* New rules aimed at limiting risk in swaps market
* Goal to implement swaps reforms unlikely before year end
By Alexandra Alper and Louise Egan
MEXICO CITY, Nov 5 International groups tasked
with safeguarding the world banking system conceded they would
miss a deadline for new rules aimed at limiting risk and
boosting transparency in the $648 trillion over-the-counter
At a meeting of the Group of 20 leading economies in Mexico
City, the head of the G20's regulatory arm said the goal of
having strong global swaps reforms in place by the end of 2012
was not in the cards.
"We are going to use all the time that is left in 2012 to
get as much done in 2012 and then take stock instead of what
remains to be done in a reasonable time frame," Financial
Stability Board chief Mark Carney told reporters.
With memories of the 2007-2009 financial crisis still raw,
the G20 agreed in late 2009 that derivatives like interest rate
swaps and credit default swaps should be traded on electronic
platforms, centrally cleared and recorded, by the end of 2012.
The FSB, the group's regulatory arm , has been tracking each
country's progress on implementing the rules.
In a communique, the G20 economies stuck to an end-of-year
deadline for new bank capital rules but acknowledged that
cross-border disputes had hampered timely implementation of the
"We agree to put in place the legislation and regulation
for OTC derivatives reforms promptly and act by end-2012 to
identify and address conflicts, inconsistencies and gaps in our
respective national frameworks, including in the cross-border
application of rules," the leaders said.
The swaps rules were a key response to the 2007-2009
financial crisis, which was fueled by risky derivatives trading
at firms like insurer American International Group that
led to multi-billion dollar taxpayer bailouts.
One of the biggest sticking points has been an American bid
to regulate swaps activity in other countries if it impacts U.S.
commerce or financial stability.
Finance ministers from Britain, France and Japan asked the
U.S. Commodity Futures Trading Commission last month to curb the
cross-border reach of its new derivatives rules amid signs that
the global derivatives market was already fragmenting.
Some market participants are choosing non U.S. banks to
avoid the cost and red tape of having to comply with U.S. and
their own domestic rules.
Carney, who also heads Canada's central bank, said the next
few weeks would be important for resolving the cross-border
disputes, especially between the United States and Europe, where
the bulk of derivatives trading takes place.
He added that discussions soon would be held to thrash out
differences and that the FSB "will take an active interest in
trying to encourage that part."
Despite the hiccups, Carney pointed out that key pieces of
infrastructure mandated by the regime - such as central
counterparties to back trades and swap data warehouses meant to
collect transaction data - are already in place.
A regulatory official , who could not be quoted on the
record, said G20 leaders had discussed the cross- b order aspects
of swaps regulation during the meetings, but that much of the
decision making would have to take place at a lower level.
The official said the it was not the FSB's job to