The Treasury Department is monitoring Wall Street efforts toescape U.S. swap-trading restrictions for overseas derivatives,according to a department official.

Treasury is watching steps banks have taken to removeparent-company guarantees from their overseas affiliates andwhether those steps eliminate the U.S. banks' exposure, theofficial said yesterday. Banks have been changing operations totrade derivatives with other dealers in the $700 trillion globalmarket in a way that avoids curbs imposed by the Dodd-FrankAct.

Treasury joins the Commodity Futures Trading Commission (CFTC)and the Federal Deposit Insurance Corp. in reviewing the practice.The Dodd-Frank restrictions were intended to reduce risk and boosttransparency in the market by having most swaps guaranteed atclearinghouses and traded on exchanges or swap-executionfacilities.