SIFMA Supports US-EU Trade Agreement, Offers Recommended Framework for Financial Services Provisions (with Lofchie Comment)

SIFMA has announced the availability of a white paper that outlines the financial industry's priorities for a U.S.-EU Transatlantic Trade and Investment Partnership. This paper was developed jointly by SIFMA and its European affiliate, the Association for Financial Markets in Europe ("AFME").

The joint letter covered the following issues:

Commercial Presence: the letter describes the fundamental issue as equivalent "national treatment" for a financial institution operating cross-border outside its home jurisdiction;

Cross-Border Business Operations: allowing services to be offered from outside the local jurisdiction to sophisticated investors within the jurisdiction;

Consumers Traveling Abroad: permitting the nationals of one country to use the financial services of the country in which they are present;

Information Processing: permitting financial data to be transferred across national lines;

Movement of Persons: allowing temporary registrations of persons in one jurisdiction who have been previously registered in another jurisdiction;

Codifications of Existing Favorable Market Access Conditions: formalizing existing and future exemptions for cross-border services;

New Services: allowing the cross-border offering of novel products that are not currently offered in the jurisdiction into which they are proposed to be offered;

Regulatory Transparency: clear rules;

Investment Chapter: protection of investors putting capital into financial institutions;

Intellectual Property Rights: just what it says; and

Recognition Agreements: cross-border licenses or "substituted compliance."

Lofchie Comment: There is actually quite a lot going on here, including much that could impact on Dodd-Frank and U.S. competitiveness. Much of Dodd-Frank is fundamentally inconsistent, whether intentionally or accidentally, with the principles laid out in the letter. By way of a simple example, Dodd-Frank allows FDIC-insured (U.S.) banks much greater freedom to offer interest rate and currency swaps in the United States than it allows to non-U.S. banks. Although it is universally agreed, including by relevant members of Congress, that this cross-border discrimination against non-US banks was an accident of bad drafting, it has not been remedied yet (and the effective date of the discrimination is looming closer). In short, there is a choice to be made here: either (i) the U.S. can proceed down its current course, which will result in more disparate national treatment of financial entities, and greater separation of financial activities in the United States from those in Europe (as well as Asia) or (ii) the U.S. can put our current regulatory "trend" on pause and consider what we should be doing as a country. In the preceding sentence, I used the word "trend," rather than the word "direction," because our financial regulatory policy, as embodied by Dodd-Frank, does not reflect a considered direction. The statute was adopted in haste, without any consideration (certainly none that shows in the legislative history) of its international implications, which are very substantial. Pushing on with the implementation of a statute that has so great an effect on international markets, but was adopted without any considerations of those effects, is likely to lead to bad results domestically as well as internationally.

Click hereto view white paper in full (links externally to SIFMA website).