ABA Submits Comments to Treasury and Prudential Regulators Regarding CFTC Cross-Border Regulatory Interpretations (with Lofchie Comment)

The American Bankers Association ("ABA") submitted comment letters to the U.S. Treasury and Prudential Regulators regarding the CFTC's October 10 clearing requirement for interest rate and index credit swaps entered into between overseas branches and non-U.S. customers, and the conditions under which a swap is to be executed with an overseas branch.

The letters stated that the ABA believes that key aspects of the CFTC's interpretations on cross-border implementation will "impose avoidable harm on U.S. businesses through measures that are not required to meet its systemic risk management goals" by restricting the ability of overseas branches of U.S. banks to participate in local swaps markets and forcing them to rely on direct competitors to meet financial services needs. The letters stated that the ABA plans to send the CFTC a similar letter requesting the reevaluation of two aspects of their cross-border interpretations, including:

• to consider delaying the October 10 date and provide for an appropriate phase-in period for the mandatory clearing of interest rate and index credit swaps entered between a U.S. bank's overseas branches; and
• to reconsider the restrictive set of conditions on the circumstances in which a given swap can be considered to be executed with an overseas branch of a U.S. bank.

Lofchie Comment: The reason why the Administrative Procedures Act requires that proposed rules be submitted for public comment is to allow the public, including market participants, to raise issues, including problems with rulemaking that may potentially damage the U.S. economy. The decision that the CFTC made to adopt the Interpretative Guidance on cross-border issues without going through an ordinary rulemaking process will create problems that are not going to go away. It would be better if the CFTC would simply put the Interpretative Guidance on hold and then propose it for public comment in the Federal Register.

See: ABA Letter to Treasury; ABA Letter to Prudential Regulators. See also: SIFMA AMG Submits Comments to CFTC on Cross-Border Phase-in Exemptive Order and Final Interpretive Guidance (with Lofchie Comment) (August 23, 2013) MFA and AIMA Submit Letter to CFTC on Cross-Border Exemptive Order Asking Delay of Reporting Requirements and on Changes to Status as U.S. Person (August 23, 2013) Industry Groups Submit Critical Comments on CFTC Cross-Border Comments (with Lofchie Comment) (August 13, 2013) CFTC Issues Notice of Expiration of Cross-Border Exemptive Relief (Lofchie Comment) (July 31, 2013) Delta Strategy Group Summary: Final CFTC Cross-Border Guidance and Accompanying Exemptive Order (July 19, 2013) IIB Files Comments on CFTC Cross-Border Exemptive Order (with Lofchie Comment); CFTC Approves Cross-Border Guidance and Exemptive Order (with Lofchie Comment) (July 12, 2013).