A U.S. House panel approved four measures to cut back new regulations aimed at the $601 trillion swaps market, including a measure to repeal the so-called “push-out” provision requiring depository banks to transfer derivatives trades to an affiliate.
The House Financial Services subcommittee on capital markets approved the measure, which would repeal a provision, known as “716” for its section in the Dodd-Frank Act, that forces banks with access to deposit insurance from the Federal Reserve’s discount window to move some of their derivatives transactions into an affiliate.
“There are broad-based objections to 716 as actually creating more risk than it might mitigate,” Representative Nan Hayworth, a New York Republican and sponsor of the measure, said today. “Banks are the heaviest regulated and safest entities within holding companies.”
House Republicans, who almost unanimously opposed Dodd-Frank, have targeted the derivatives rules through several measures aimed at reshaping or repealing pieces of the law. Democrats -- who control the Senate -- have defended the law, which was written in the wake of the 2008 financial crisis that was fueled in part by derivatives trades.
The subcommittee approved the measure over the objections of some Democrats 21-12. Even if it is eventually adopted by the House, it has little chance of gaining approval in the Senate, where Democrats have resisted Republican attempts to change the law.
Derivatives, including swaps, are contracts whose value is based on stocks, bonds, loans, currencies or commodities, or linked to specific events such as changes in interest rates.
The panel also approved four other measures, three of them addressing derivatives. One would exempt some derivatives trades between subsidiaries of the same company from margin, clearing and reporting rules. It was approved 23-6.
The second measure aims to require the U.S. Commodity Futures Trading Commission and Securities and Exchange Commission to allow for flexibility in the types of trading methods on so-called swap execution facilities.
The measure addresses concerns of market participants and a bipartisan group of lawmakers about a CFTC proposal that would require participants in the trading facilities to request price quotes from a minimum of five possible sellers. The SEC on Feb. 2 proposed a rule that would allow swap buyers to request a quote from a single seller.
While the measure was approved by voice vote, some Democrats on the panel voiced worry over micromanaging regulators who are in the midst of writing the final rules.
“My concern is about Congress meddling too deeply into the rulemaking process,” said Representative Maxine Waters of California, the senior Democrat on the subcommittee. “I have no reason to believe that they won’t be responsive to legitimate industry concerns.”
Lawmakers also approved a measure clarifying that swap dealers are allowed to engage in transactions with pension plans without being considered a fiduciary. A Department of Labor rule aimed at making investment advisers more accountable for the advice they give was delayed in September amid lawmaker and industry complaints.
In a separate action, the subcommittee approved a measure that would impose new cost-benefit analysis requirements on SEC, including requirements that the agency review all of the agency’s rules in order to identify and change any that are considered outdated or ineffective.
Panel Republicans approved the bill 19-15, with Democrats voting against the measure.