CFTC Limits Global Swaps Power

Dodd-Frank guidance means big banks have more leeway to fall under foreign regulations.

JPMorgan Chase & Co., Goldman Sachs Group Inc. and other banks won greater ability to fall under foreign regulations when they trade swaps overseas under guidance proposed Friday for the Dodd-Frank Act’s international reach.

Commodity Futures Trading Commission members, in a private vote, unanimously approved proposing interpretive guidance allowing for so-called substituted compliance for branches, subsidiaries and other overseas affiliates of U.S. banks when foreign jurisdictions have comparable rules. Banks have spent two years lobbying against efforts to automatically apply Dodd- Frank to their overseas operations, saying doing so would hurt their ability to compete.

Comparable Requirements

Foreign swap dealers could meet entity-level rules through compliance with comparable overseas requirements, Gensler said. Overseas branches may be allowed to use substituted compliance for transaction rules when trading with clients that have a guarantee from a U.S. company or operate as conduits of U.S. entities.

Overlapping Rules

European Union and U.S. regulators have struggled to align the substance and timing of the measures, with banks warning that inconsistencies or overlapping rules may increase costs and give foreign competitors an advantage.

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