WASHINGTON (Reuters) - A group of Senate Democrats on Wednesday expressed concern to Treasury Secretary Jack Lew about a lack of coordination on new derivatives rules by two key regulatory agencies and urged more cooperation with their foreign counterparts.
The Commodity Futures Trading Commission and the Securities Exchange Commission should harmonize rules stating how U.S. laws apply to foreign banks, they said, an issue that has sparked anger among politicians abroad.
“More time is needed for domestic harmonization and sequencing with regulations that occur abroad,” the six Democratic senators said in the letter.
Chuck Schumer and Kirstin Gillibrand, who represent the financial hub of New York, were among the senators. The others are Thomas Carper of Delaware, Heidi Heitkamp of North Dakota, Michael Bennet of Colorado, and Kay Hagan of North Carolina.
Gary Gensler, the chairman of the CFTC, has been criticized for aggressively pushing a policy in which foreign banks would have to comply with new U.S. rules for risky derivatives.
He has said the broad reach is necessary to protect American taxpayers from financial damage abroad.
Michel Barnier, in charge of financial services in the European Union, said last week that the approach was “flawed”, because Europe and Asia are working on similar laws that U.S. regulators can rely on.
The CFTC and the SEC are both writing new rules for derivative markets as part of the Dodd-Frank overhaul of Wall Street, a wide-ranging law to make banking less risky after the devastating 2007-2009 financial crisis.
The SEC has written its own cross-border proposal, which is more attuned to foreign regulators’ concerns.
A group of House of Representatives members had earlier come out against Gensler, and the House has adopted a bill that would force the two agencies to work together, though that stands virtually no chance of making it through Congress.
Gensler has forceful backers in the Senate, such as Elizabeth Warren, who urged federal regulators to “show some backbone” and stick to the CFTC’s proposal. Carl Levin, a Michigan Democrat, also supports the CFTC.
The Treasury Department did not comment on the letter. The CFTC also declined to comment. Lew has in the past said that foreign regulators were being too critical of U.S. efforts, and called an earlier letter by Barnier “ill-informed”.
The CFTC is facing a July 12 deadline to decide whether it will extend broad relief it has granted foreign companies to comply with its rules, or issue final cross-border rules.
The issue is highly controversial among the five CFTC commissioners, with fellow Democrat Mark Wetjen in a speech on Tuesday asking for a delay. But Gensler told journalists the same day he wants it done by July 12.
Reporting by Douwe Miedema; Editing by Tim Dobbyn