Financial Regulatory Forum

FACTBOX-Winners and losers in the U.S. financial bill

WASHINGTON, June 25 (Reuters) – U.S. lawmakers are close to finalizing legislation that will overhaul the country’s financial system and usher in new rules for Wall Street.

A joint House of Representatives and Senate committee approved a bank regulation bill that lawmakers expect to pass each chamber separately in the coming days. It will then be ready for U.S. President Barack Obama to sign into law, possibly by July 4.

Below are some of the likely winners and losers under the regulation bill.

CREDIT RATING AGENCIES – WIN AND LOSE

* Credit rating agencies — such as Moody’s Corp, Standard & Poor’s and Fitch Ratings — will be subject to greater liability.

* Rating agencies could be sued if they “recklessly” failed to review key information in developing a rating.

* The Securities and Exchange Commission will be given two years to find a way to mitigate conflicts of interests at the biggest rating agencies, Moody’s, S&P and Fitch, which are paid by the issuers whose debt they rate. The two years give the agencies breathing space but if the SEC does not find a solution, the regulator is required to implement a proposal by Senator Al Franken and create a board to match rating agencies with debt issuers.

ANALYSIS-Key US senator gains clout on Wall Street bill

WASHINGTON, June 8 (Reuters) – U.S. Senator Blanche Lincoln, an Arkansas moderate Democrat, is buoyed by winning nomination to a third term in the Senate but not sure of victory for her hot-button Wall Street reform — forcing big banks to spin off their swaps desks.

The proposal is one of the salient disputes for House-Senate negotiations that could begin this week on a financial regulatory reform law. The Senate endorsed the idea. The House is silent on the question.

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LCH highlights challenge in derivatives regulation

By Huw Jones

LONDON, May 18 (Reuters) – LCH.Clearnet moved to reassure markets on Tuesday that its capital base was adequate despite a ratings downgrade at a time when regulators are finalising laws to force banks to clear vast numbers of derivatives.

Standard & Poor’s placed LCH.Clearnet’s rating on “negative credit watch” last week after one of its biggest customers, the transatlantic exchange NYSE Euronext said it would stop using the Anglo-French clearer from late 2012.

“The clearing activity itself is not dependent upon the creditworthiness of the clearing house,” LCH.Clearnet Chief Executive Roger Liddell told an industry conference.

COLUMN-What’s in a word? Senate battle on derivatives: John Kemp

– John Kemp is a Reuters market analyst. The views expressed are his own –

By John Kemp

LONDON, May 10 (Reuters) – May or shall. Even one small word can make a big difference. Lobbyists for financial services firms and officials from the Commodity Futures Trading Commission (CFTC) and the U.S. Treasury are sparring over a single word in the derivatives reform legislation being considered by the U.S. Senate.

At issue is the Commission’s authority to impose position limits on major energy contracts.

White House highlights “lobbyist loopholes” in regulation debate – link

The White House published a top 10 list of “lobbyist loopholes” sought by Wall Street in Senate debate on an overhaul of financial regulation. Here is a link to the list, which tellingly omits the banking industry’s desire to strike a provision that would force banks to spin off their lucrative swaps desks.

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BREAKINGVIEWS-Is Obama losing control of U.S. financial reform?

– The authors is a Reuters Breakingviews columnists. The opinions expressed are his own –

By James Pethokoukis

WASHINGTON, May 3 (Reuters Breakingviews) – Is President Barack Obama losing control of financial reform? It is starting to seem that way. With the bill nearing its finale in the U.S Senate, Democratic legislators — and even some Republicans — seem to be scrambling to out-regulate each other while the White House keeps mum. The Obama administration defied its liberal base on nationalizing the banks last year and breaking them up this year. But as controversial amendments, such as those on derivatives, continue to emerge, it may be time to pipe up.

Of course, Team Obama would understandably prefer to lie low. It doesn’t want to backtrack entirely from the populist, get-tough-on-the-banks line. Arguing forcefully on behalf of letting banks keep their derivatives businesses, in particular, would risk message mismatch. That’s especially true after the Securities and Exchange Commission filed a lawsuit against Goldman Sachs over its involvement in a derivatives deal.

Is regulation too risky to leave to politicians? EU banks think so

By Huw Jones

Put regulation in the hands of politicians and, well, it becomes politicised.

That, anyway, is what Europe’s new kid on lobbying block, the Association for Financial Markets in Europe (AFME’s), told the Reuters Regulation Summit about EU plans to crack down on opaque derivatives markets by insisting on central clearing of standardised contracts, trade reporting and even exchange trading. (more…)

FACTBOX-US swaps reforms proposed by Agriculture panel

WASHINGTON, April 23 (Reuters) – The Senate Agriculture Committee has proposed tough rules for the previously unregulated $450 trillion derivatives market, including a requirement for banks to spin off their swaps trading desks.

Banks and major financial companies that dominate the market are concerned the proposal could cut into their profits — and businesses ranging from oil companies to manufacturers that use derivatives to hedge risk are also worried the bill could hike their costs.

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SNAP ANALYSIS – Goldman charges give lift to Lincoln US swaps bill

By Roberta Rampton

WASHINGTON, April 16 (Reuters) – Bombshell fraud charges against Goldman Sachs, one of the largest swaps dealers on Wall Street, give new impetus to a tough derivatives reform bill proposed by Senate Agriculture Chairman Blanche Lincoln on Friday.

The bill must be meshed with other proposals that are part of Congressional efforts to reform the financial regulatory system. But Lincoln is now placed to play a leading role in the debate on how the final package will impact on the $450 trillion over-the-counter swaps market.

With one eye to the November mid-term elections, the bill could find support from lawmakers keen to take a stand against excess on Wall Street. But it is unclear whether the White House would support going this far.

NEWSMAKER – Farmer’s daughter US Senator takes on Wall St with derivatives bill

By Charles Abbott and Roberta Rampton

WASHINGTON, April 16 (Reuters) – Senator Blanche Lincoln, a self-styled “farmer’s daughter” facing a tough re-election race in Arkansas, had not been expected to become the latest Democrat to rail against the risky practices of Wall Street.

Lincoln, chairman of the Senate Agriculture Committee, is known for working across party lines on issues, but took Washington by surprise with an aggressive draft bill she was unveiling on Friday that she hopes will force big banks out of the $450 trillion over-the-counter derivatives market.

“My bill will put banks back into the business of banking and prevent future bailouts of Wall Street firms engaging in risky behavior,” Lincoln said in a statement.

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