03 December 2014

Bloomberg: Wall Street called out by regulators for stalling on swaps rule

U.S. regulators are getting fed up with Wall Street’s attempts to stall a restriction on risky swaps trades. Getting another reprieve is crucial for banks, because it would give them time to persuade a Republican-led Congress to kill the requirement. “Just because it’s authorized doesn’t mean it happens,” Comptroller of the Currency Thomas Curry said when asked whether Wall Street would get another extension, which regulators can grant under the Dodd-Frank Act. Banks should be ready to comply with a July deadline, he said.  “Five years seems to be a pretty good period of time to get those sorted out,” Federal Deposit Insurance Corp. Vice Chairman Thomas Hoenig, whose agency consults with the Fed and OCC, said in an interview. “They haven’t shown me anything to convince me” that more time is needed, he said of banks.

Wall Street is also concerned that it will have to re-negotiate contracts with clients and isn’t certain what kind of affiliate structures make the most sense to hold swaps, said Doug Harris, a former senior deputy comptroller at the OCC. Much of the confusion is blamed on the Securities and Exchange Commission, which hasn’t finished writing rules for swaps that lenders have to push out, he said. Banks aren’t “completely prepared,” said Harris, who now advises financial firms at Promontory Financial Group LLC. “They don’t have all of the information that they need.” Hoenig argues that letting Wall Street keep swaps inside big banks leads to a perception that the products benefit from government support. That muddies the market’s ability to measure the risk of derivative transactions, he said. “The safety net is a pretty significant subsidy for those activities,” Hoenig said.

Full article on Bloomberg

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