Derivatives Are an Issue AgainBy
Business groups submitted a host of proposals to the Senate Banking Committee in April as it and other committees in both the House and Senate begin to consider changes to the Dodd-Frank Act. On June 8, 2017, the House passed a bill called the Financial CHOICE Act.
But only Republicans supported it, meaning its chances of passage in the Senate are nearly nil. That elevates the importance of the Senate Banking Committee’s efforts, which appear to be on a more bipartisan track. The House bill says nothing about Dodd-Frank provisions on nonfinancial companies using derivatives to hedge risk.
Testifying at the Senate Banking, Housing and Urban Affairs Committee, Thomas C. Deas, Jr., current chairman of the National Association of Corporate Treasurers (NACT), noted that, in the last Congress, the chairman of the Senate Banking Committee, Michael Crapo (R.-Idaho), led a successful bipartisan effort to enact a clear end-user (nonfinancial companies) exemption from having to post cash margin for end users’ derivatives positions. But Deas added, “[W]e are increasingly concerned that the uncleared OTC derivatives we seek to continue using to reduce our business risks will become too costly because of much higher regulatory capital requirements imposed on the financial companies that we rely on as our derivatives counterparties.”