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From Banking and Finance Law Daily, May 7, 2013

House Panel Approves Changes to Dodd-Frank Derivatives Provisions

By Sarah Borchersen-Keto, Washington News Bureau

The House Financial Services Committee approved a number of measures that would amend the derivatives provisions of the Dodd-Frank Act, ignoring a request from the Treasury Department not to tinker with the law until regulators had finished their work.

At a May 7, 2013, markup, the committee approved six bills relating to Title VII of Dodd-Frank, as well as two bills to amend the JOBS Act, and a bill to enhance the economic analysis carried out by the Securities and Exchange Commission.

Not chiseled into stone. Hensarling told the markup that the committee would be “negligent in its duties” if it did not continue to monitor and improve Dodd-Frank, emphasizing that it “was not chiseled into stone, it did not come down from Mount Sinai.” Ranking member, Rep. Maxine Waters (D-Calif.), added that while she was not opposed to true technical corrections to Dodd-Frank, “I am exceedingly nervous about re-opening the bill and making major adjustments to what is still an unfinished project, particularly with regard to…derivatives reform.” Waters expressed concern that legislation might tie the hands of regulators, or constrain their ability to respond to evolving markets.

Swaps. Bills that cleared the committee included H.R. 742, the Swap Data Repository and Clearinghouse Indemnification Correction Act of 2013, which would remove an indemnification requirement imposed on foreign regulators under Dodd-Frank as a condition of obtaining access to data repositories. H.R. 677, the Inter-Affiliate Swap Clarification Act, exempting inter-affiliate trades from Dodd-Frank’s margin, clearing, and reporting requirements, also cleared the committee.

Another bill that members approved, H.R. 992, would require covered depository institutions to “push-out” structured-finance swaps to a separately capitalized entity, defined by the legislation as a “swap or security-based swap based on an asset-backed security.”

Treasury plea. By passing the bills the committee chose to ignore a letter from Treasury Secretary Jacob Lew, which urged restraint. “The derivatives provisions in the Wall Street Reform Act constitute an important part of the reforms being put in place to strengthen our financial system by improving transparency and reducing risks for market participants. These reforms should not be weakened or repealed,” Lew wrote to Hensarling. He stressed that regulators should be allowed to complete their rulemakings, “and then determine what changes, if any, might be necessary in certain areas to improve the effectiveness of these reforms.”

LegislativeActivity: DoddFrankAct SecuritiesDerivatives

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