New Swap Rules Draw Concern from Foreign Regulators

Regulators from the European Union and the U.K. urged the U.S. to delay new rules concerning swap contracts and to reconsider how the rules apply to foreign banks and transactions, a predicament called extraterritoriality.

The concern adds to a host of complaints stemming from foreign regulators in Japan, France, and Switzerland, that the U.S. is overstepping its authority and jurisdiction. The European Commission warned the CFTC in a letter on Friday that the proposed rules could “lead to duplication of laws and to potentially irreconcilable conflicts of laws for market operators.”

In a separate letter, the U.K.’s Financial Services Authority urges the CFTC to delay the new swap rules for at least another six months. Under the existing schedule, foreign banks would have until October 12 to register with the CFTC if they enter into a certain amount of swap business with U.S. firms.

The CFTC has not issued a response to the concerns, but Chairman Gary Gensler has said in the past that risk from foreign bank deals flows back to U.S. firms.  “There are some in the financial community who might want the CFTC to ignore the hard lessons of the crisis,” Mr. Gensler said in June when the CFTC issued the proposed rules.

The CFTC issued the proposed guidance on June 29 and is expected to take a final vote within the upcoming weeks.

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