WASHINGTON Preventing another financial crisis similar to the one that shook the markets in 2008 requires a global effort and can not be done by one nation alone, the head of the U.S. Commodity Futures Trading Commission said on Tuesday.
Gary Gensler, the chairman of the CFTC, the regulator of futures markets, said even though it is more than two years since the crisis exposed flaws in global financial and regulatory systems around the world, "significant uncertainty" still remains.
"We must continue to work together to bring oversight to the swaps market to help reduce the chance of the next crisis," Gensler said in prepared remarks before the European Parliament in Brussels.
"Effective reform cannot be accomplished by one nation alone. It will require a comprehensive, international response," he said.
The CFTC is writing dozens of regulations to implement the Dodd-Frank law, which was enacted last July and gives the agency some oversight of the $600 trillion global swaps market. Most rules have not been finalized.
As U.S. regulators work to implement their financial reform rules, regulators in Britain and other parts of the world are moving forward with their own plans.
There are concerns that a divide among the plans could lead to regulatory arbitrage, whereby traders take advantage of a price difference between two or more markets, or shift their trading and banking to countries with looser regulations.
"As we work to bring oversight to the swaps market, the CFTC is consulting heavily with counterparts in Europe and elsewhere to harmonize our approach to swaps oversight," said Gensler, who added the CFTC routinely shares information with its counterparts in Europe and around the world.
A swaps proposal from the European Commission has many of the same components as the United States, including regulation of dealers, clearing of standardized swaps and an increase in market transparency. Europe is expected to strengthen its financial rules later this year.
But there are signs of a less-than-smooth road ahead in the United States.
Gensler said last week the futures regulator will miss the July deadlines in the Dodd-Frank law for many of the regulations. The CFTC still has to propose a definition for swaps, and capital and margin requirements for swap dealers and major swap participants.
The CFTC has scheduled its next two rule-making hearings for March 30 and April 7.
(Editing by Sofina Mirza-Reid)