US banks plead to limit range of swap rules

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by Gregory Meyer and Aline van Duyn in New York

US banks are urging regulators writing new rules for the derivatives markets under 2010's Dodd-Frank Act to keep their hands off the banks' swaps businesses in London and other overseas financial centres.

The lobbying efforts highlight the fact that regulations are being written at different speeds in different countries, allowing for "regulatory arbitrage", which officials have sought to stamp out. The US government had to bail out insurer AIG because of soured swap trades by a London-based division.

Lawyers for Bank of America, Citigroup and JPMorgan Chase have written to US regulators and asked them to keep swap business conducted abroad from having to register in the US, warning of "duplicative regulation", "unnecessary cost" and "damage" to their competitiveness in foreign markets. The Securities Industry and Financial Markets Association, a US banking lobby, has told regulators that rigidly applied rules could prompt US swaps dealers to "move offshore".

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The Dodd-Frank Act, signed into law in July 2010, represented the most significant and controversial overhaul of the U.S. financial regulatory system since the Great Depression. Forty NYU Stern faculty, including editors Viral V. Acharya, Thomas F. Cooley, Matthew P. Richardson, and Ingo Walter, provide a definitive analysis of the Act, expose key flaws and propose solutions to inform the rules’ adoption by regulators, in a new book, Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance (Wiley, November 2010).

About Restoring Financial Stability

Previously, many of these faculty developed 18 independent policy papers offering market-focused solutions to the financial crisis, which were published in a book, Restoring Financial Stability: How to Repair a Failed System (Wiley, March 2009).

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