UPDATE 1-U.S. permits some foreign swaps rules, EU still unhappy

Fri Dec 20, 2013 6:07pm EST
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WASHINGTON Dec 20 (Reuters) - The United States granted foreign banks a reprieve on Friday from some of its new rules for risky derivatives, putting itself on a collision course with overseas regulators who want more reliance on home-country rules.

The U.S. swaps regulator laid out which of its new rules foreign banks have to comply with if they trade with American clients, or even if they deal with customers in their own country from an office in the United States.

The Commodity Futures Trading Commission had temporarily lifted its rules, but they kick back in on Saturday, although in some cases foreign banks can now rely on comparable rules in their own countries.

Politicians across the world agreed to clamp down on Wall Street after the 2007-09 credit meltdown, but different countries have since worked on rules that are not always identical, and that have different time frames.

The CFTC has been comparing the rules and will recognize some of them through a legal concept known as substituted compliance. But this does not go far enough for the foreign regulators in six jurisdictions across the world.

"These determinations reflect the Commission's commitment to coordinating our efforts to bring transparency to the swaps market and reduce its risks to the public," CFTC Chairman Gary Gensler said in a statement together with the two other Democrat commissioners who voted in favor.

The only Republican member of the Commission, Scott O'Malia, dissented.

The six jurisdictions are Europe, Australia, Canada, Hong Kong, Japan and Switzerland.

The three main issues where the rules apply are data reporting, routing trades through clearing houses to reduce counterparty risk, and trading swaps on platforms that are comparable with exchanges.

Two sources close to the European Union said earlier in the day that Brussels was unhappy with the CFTC's plans, and that the same was true for other jurisdictions.