FEI Applauds Passage of Dodd-Frank Fix for Derivatives End-Users, Urges Senate Consideration of Legislation

Mar 27, 2012, 09:16 ET from Financial Executives International

WASHINGTON and MORRISTOWN, N.J., March 27, 2012 /PRNewswire-USNewswire/ -- Financial Executives International (FEI), a professional association for senior-level financial executives from both major public and private companies, today issued a statement commending the House of Representatives for overwhelmingly passing bipartisan legislation, H.R. 2682 and H.R. 2779, to clarify that commercial end-users of over-the-counter (OTC) derivatives should be exempt from certain regulatory requirements, as intended by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

"Companies rely on over-the-counter derivatives to manage the risks associated with daily business operations, including cost fluctuations in materials used to make products.  This legislation will ensure end-users can continue to hedge business risks, innovate and grow their businesses without adding billions of dollars in new costs or placing strain on hundreds of thousands of jobs in these times of continued uncertainty.  I hope the Senate will soon take up this legislation, which will reduce regulatory burden, allow businesses to expand, create jobs and contribute to economic growth," said Marie Hollein, President and Chief Executive Officer, Financial Executives International. 

"The authors of the Dodd-Frank Act recognized that end-users are different, represent a small part of the derivatives market, do not speculate or pose systemic risk, yet federal regulators are proposing rules that would subject these businesses to costly new requirements.  H.R. 2682 would clarify, as the Dodd-Frank Act intended, that end-users should not be subject to regulatory-imposed margin requirements, and H.R. 2779 would prevent companies' internal, or inter-affiliate trades from being subject to requirements meant only for certain street-facing swaps." 

FEI, along with the Coalition for Derivatives End-Users, sent a letter in support of the legislation to Members of Congress on March 23rd.  View the letter on the FEI website, here. The House Financial Services Committee favorably reported these bills on Nov. 30th and the Agriculture Committee on January 25th.

  • The Business Risk Mitigation and Price Stabilization Act (H.R. 2682) -Would clarify that end-users should continue to have the ability to manage their risk without unnecessary initial and variation margin requirements imposed on them. Imposing margin would divert funds away from key company investments and tie them up into margin accounts, which could impact business growth and job creation. We are hopeful H.R. 2682 will be expanded to exempt trades made by "financial" end-users, such as pension funds.
  • Exempt Inter-Affiliate Swaps from Certain Regulatory Requirements (H.R. 2779) – Would prevent costly regulation of companies' inter-affiliate swap transactions, which may occur under the company's corporate structure between a parent company and a subsidiary. Without this clarification, these internal, or back-to-back trades may be subject to margin, real time public reporting, and other costly requirements. H.R. 2779 would exempt inter-affiliate trades from regulations that were meant to apply only to market-facing swaps. 

About FEI

Financial Executives International is the leading advocate for the views of corporate financial management. Its 15,000 members hold policy-making positions as chief financial officers, treasurers and controllers at companies from every major industry. FEI enhances member professional development through peer networking, career management services, conferences, teleconferences and publications. Members participate in the activities of 86 chapters, 74 in the U.S., 11 in Canada and 1 in Japan. FEI is headquartered in Morristown, NJ, with additional offices in Washington, D.C. and Toronto.  Visit www.financialexecutives.org for more information.

SOURCE Financial Executives International