June 30, 2010 / 5:47 PM / 9 years ago

No swap end-user margins in bank bill-Frank aide

WASHINGTON, June 30 (Reuters) - The Wall Street reform bill would not impose margin and capital requirements on swap end-users, a spokesman for Representative Barney Frank said on Wednesday, downplaying concerns raised by a senior Republican.

Republican Senator Saxby Chambliss on Tuesday said that a mistake in the sweeping bill — which was moving to a final vote soon in the House of Representatives and by mid-July in the Senate — could burden commercial end-users of over-the-counter derivatives, such as swaps.

Chambliss offered an amendment to the bill that was aimed at ensuring end-users, ranging from airlines to agribusinesses, would not face indirect costs of a new margin requirement.

The amendment was rejected by senators on a joint Senate-House conference committee that finalized the bill.

On Wednesday, spokesman Steven Adamske said Republicans and banks fear “we are going to impose margin and capital requirements on end users. That is not the case in the bill. We do that for major swap participants and swap dealers. If you are not either of those two things, you are considered exempt from these rules.

“No commercial end user will be considered those two things ... The bill is crystal clear,” he said.

Swaps and OTC derivatives are contracts that allow users to hedge against the risks of movements in interest rates, energy prices, currency exchange and other business factors.

The bill would impose regulation for the first time on the $615 trillion OTC derivatives market, rerouting much of the market through more accountable channels, such as exchanges, electronic trading platforms and central clearinghouses.

Banks would also have to spin off the riskiest of their swap-clearing desk operations, but could keep many swaps in-house, including derivatives to hedge their own risks, under rules drafted by Democratic Senator Blanche Lincoln.

The OTC derivatives market — especially credit default swaps like those that dragged down former insurance giant AIG (AIG.N) — were widely blamed for aggravating the 2007-2009 financial crisis. The reform bill aims to prevent a repeat of that crisis, which dragged the economy into a deep recession.

Editing by Kenneth Barry

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