Oct 15 (Reuters) - The U.S. House of Representatives Financial Services Committee on Thursday approved proposed new rules for over-the-counter derivatives, marking the first major step forward in months for the Obama administration's sweeping program to tighten bank and capital market regulations.
The following is a summary of pending reform proposals. Companies whose businesses could be at risk are listed under 'political risk exposure.'
OTC DERIVATIVES: The House Financial Services Committee approved a bill to impose regulations on the $450 trillion OTC derivatives market. Like other bills before the committee, the OTC derivatives measure was expected to be folded into a single bill before going to the House floor for a November vote.
A competing, somewhat tougher bill in the House Agriculture Committee is expected to undergo a committee vote next week.
The bill approved by financial services, authored by Democratic committee Chairman Barney Frank, is weaker than one proposed earlier this year by President Barack Obama.
The president wants clearing of standardized OTC derivatives and would move them, as much as possible, on to regulated exchanges, while reporting would be required for transactions in 'customized' derivatives.
Related legislation has been introduced in the Senate, but no action has been taken.
Political risk exposure: JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, CME Group Inc, IntercontinentalExchange.
(For the Oct. 2 draft of the House Financial Services Committee's bill, double-click on: http://www.house.gov/apps/list/speech/financialsvcs_dem/otc_discussion_draft_for_markup.pdf)
(For the Obama administration's bill, double-click on: http://www.financialstability.gov/docs/regulatoryreform/titleVII.pdf)
(For the House Agriculture Committee's draft bill, double-click on: http://agriculture.house.gov/inside/Legislation/111/JDG_372_xml. pdf)
EXECUTIVE PAY: The House has approved a bill to give shareholders in public corporations annual, nonbinding votes on executive pay, and to ban compensation structures at major financial institutions that encourage excessive risk-taking.
Obama is pleased with the House bill, although the administration's proposal is more modest. It would give shareholders more 'say on pay,' like the House measure, but not empower regulators to ban risk-inducing pay structures.
The Senate has not yet taken action on the issue.
(For the administration's bill, double-click on: http://www.treas.gov/press/releases/docs/tg_218IX.pdf)
(For the House bill, double-click on: http://www.house.gov/apps/list/press/financialsvcs_dem/hr3269.pdf)
SYSTEMIC RISK REGULATION: Congress is moving toward empowering an inter-agency council of regulators to oversee risks to the economy from large, interconnected firms, with the Federal Reserve and Treasury Department in key roles.
The Obama administration had wanted to give the Fed a dominant position as systemic risk regulator, but that stance has softened in the face of widespread lawmaker skepticism.
The Senate has taken no action on the matter.
(For the administration's bill, double-click on: http://www.financialstability.gov/roadtostability/regulatoryreform.html)
(For the House bill, double-click on: http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/FinancialRegulatoryReform/Titles/title_I_FSOC_7-22-2009_fnl.pdf)
Keywords: FINANCIAL REGULATION/PROPOSALS
BANK REGULATION: Bank oversight would be streamlined in the Obama plan with a national supervisor, merging the Comptroller of the Currency and the Office of Thrift Supervision.
The plan would eliminate the thrift charter, although Frank opposes this. Senate Banking Committee Chairman Christopher Dodd wants more radical centralization of bank oversight.
(For the administration's bill, double-click on: http://www.financialstability.gov/docs/regulatoryreform/title-III_Natl-Bank-Supervisor_072309.pdf)
(For the House bill, double-click on: http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/FinancialRegulatoryReform/Titles/title-III_Natl-Bank-Supervisor_072309.pdf)
CONSUMER PROTECTION: A new Consumer Financial Protection Agency would be formed under the Obama plan to oversee mortgages, credit cards and other products and services.
The banking industry is fighting the CFPA more fiercely than any of the other Obama proposals it opposes.
Frank has a bill that pares back the CFPA's scope. His committee was expected to vote on the bill next week.
The Senate has taken no action.
(For the administration's bill, double-click on: http://www.financialstability.gov/docs/CFPA-Act.pdf)
(For the House bill, double-click on: http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/FinancialRegulatoryReform/Titles/title_x_CFPA-Act.pdf)
CREDIT RATINGS AGENCIES: Reliance by regulators on credit ratings would be reduced by repealing legal rules on debt that encourage the use of ratings, under the Obama plan.
The Securities and Exchange Commission is already considering reforms for ratings agencies.
Representative Paul Kanjorski, chairman of the House capital markets subcommittee, has proposed a bill that would let the SEC dictate how agencies determine ratings.
The Senate has taken no action.
Political risk exposure: Moody's Corp, Standard & Poor's, Fitch Ratings.
(For the administration bill, double-click on: http://www.financialstability.gov/docs/regulatoryreform/titleIX_subtC.pdf)
(For the House bill, double-click on: http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/FinancialRegulatoryReform/Titles/title_IX_subt_C_cred_rtg_agencis_07-20-900pm.pdf)
STUDENT LOANS: The House has approved a bill, supported by the Obama administration, to revamp the $92 billion student loan market. The Senate has not acted on the matter.
Political risk exposure: Sallie Mae (SLM Corp), Student Loan Corp, JPMorgan, Bank of America, ITT Educational Services, Corinthian Colleges.
(For the House bill, double-click on: http://edlabor.house.gov/documents/111/pdf/legislation/StudentAidandFiscalResponsibilityAct.pdf)
RESOLUTION AUTHORITY: Obama wants a government mechanism for 'orderly resolution of any financial holding company whose failure might threaten the stability of the financial system.'
The proposal is meant to prevent future case-by-case bailouts like those carried out in the hectic final days of the Bush administration during the financial crisis. Frank has also proposed a bill. The Senate has taken no action.
(For the administration's bill, double-click on: http://www.financialstability.gov/docs/regulatoryreform/title-XII_resolution-authority_072309.pdf)
(For the House bill, double-click on: http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/FinancialRegulatoryReform/Titles/title_XII_resolution_authority_7-23-2009finala.pdf)
CAPITAL AND LIQUIDITY STANDARDS: Financial institutions would have to hold more capital to absorb losses when times are tough, and make themselves more liquid, or be able to move quickly in and out of various holdings, under proposals from the Obama administration. That is in line with an accord reached in September at the Group of 20 summit meeting.
(For the administration's bill, double-click on: http://www.financialstability.gov/docs/regulatoryreform/07222009/titleVI.pdf)
(For the G20 final communique, double-click on: http://www.g20.org/Documents/pittsburgh_summit_leaders_statement_250909.pdf)
SECURITIZATION: Issuers of asset-backed securities would face new reporting requirements and be required to keep at least 5 percent of the performance risk in loans they securitize under the plan, under the Obama reform plan.
Transactions would be more standardized and compensation of securitizers would be linked to long-term performance.
Political risk exposure: Citigroup, Wells Fargo, Bank of America, JPMorgan Chase.
(For the administration's bill, double-click on: http://www.financialstability.gov/docs/regulatoryreform/07222009/titleIX.pdf)
(For the House bill, double-click on: http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/FinancialRegulatoryReform/Titles/title_IX_subt_E_securitization_7-22-2009_fnl.pdf)
HEDGE FUNDS, PRIVATE EQUITY: Obama wants to require hedge funds and other private capital pools to register with the SEC. A bill in the House would empower the SEC in this regard, while exempting venture capital firms from registration.
Political risk exposure: Bridgewater Associates, D.E. Shaw Group, Farallon Capital Management, Citadel Investment Group, Fortress Investment Group and many others.
(For the administration's bill, double-click on: http://www.treas.gov/press/releases/reports/title%20iv%20reg%20advisers%20priv%20funds%207%2015%2009%20fnl.pdf)
(For the House bill, double-click on: http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/FinancialRegulatoryReform/Titles/title_IX_subt_C_cred_rtg_agencis_07-20-900pm.pdf)
INSURERS: The administration has called for a new Treasury Department Office of National Insurance that would monitor the industry and gather data, but not regulate.
Frank's committee is debating a similar bill.
Political risk exposure: Allstate Corp, Travelers Cos Inc, Hartford Financial, MetLife Inc , Prudential Financial Inc.
(For the administration's bill, double-click on: http://www.financialstability.gov/docs/regulatoryreform/07222009/title%20V%20Ofc%20Natl%20Ins%207-22-2009%20fnl.pdf)
(For the House bill, double-click on: http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/FinancialRegulatoryReform/Titles/title_V_Ofc_Natl_Ins_7-22-2009_fnl.pdf)
((Reporting by Kevin Drawbaugh, Karey Wutkowski, Patrick Rucker, Karen Brettell, Rachelle Younglai, John Poirier, Charles Abbott, Chris Doering, David Lawder, Jonathan Spicer) (kevin.drawbaugh@thomsonreuters.com, +1-202-898-8390, +1-202- 488-3459 fax) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The following is a summary of pending reform proposals. Companies whose businesses could be at risk are listed under 'political risk exposure.'
OTC DERIVATIVES: The House Financial Services Committee approved a bill to impose regulations on the $450 trillion OTC derivatives market. Like other bills before the committee, the OTC derivatives measure was expected to be folded into a single bill before going to the House floor for a November vote.
A competing, somewhat tougher bill in the House Agriculture Committee is expected to undergo a committee vote next week.
The bill approved by financial services, authored by Democratic committee Chairman Barney Frank, is weaker than one proposed earlier this year by President Barack Obama.
The president wants clearing of standardized OTC derivatives and would move them, as much as possible, on to regulated exchanges, while reporting would be required for transactions in 'customized' derivatives.
Related legislation has been introduced in the Senate, but no action has been taken.
Political risk exposure: JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, CME Group Inc, IntercontinentalExchange.
(For the Oct. 2 draft of the House Financial Services Committee's bill, double-click on: http://www.house.gov/apps/list/speech/financialsvcs_dem/otc_discussion_draft_for_markup.pdf)
(For the Obama administration's bill, double-click on: http://www.financialstability.gov/docs/regulatoryreform/titleVII.pdf)
(For the House Agriculture Committee's draft bill, double-click on: http://agriculture.house.gov/inside/Legislation/111/JDG_372_xml. pdf)
EXECUTIVE PAY: The House has approved a bill to give shareholders in public corporations annual, nonbinding votes on executive pay, and to ban compensation structures at major financial institutions that encourage excessive risk-taking.
Obama is pleased with the House bill, although the administration's proposal is more modest. It would give shareholders more 'say on pay,' like the House measure, but not empower regulators to ban risk-inducing pay structures.
The Senate has not yet taken action on the issue.
(For the administration's bill, double-click on: http://www.treas.gov/press/releases/docs/tg_218IX.pdf)
(For the House bill, double-click on: http://www.house.gov/apps/list/press/financialsvcs_dem/hr3269.pdf)
SYSTEMIC RISK REGULATION: Congress is moving toward empowering an inter-agency council of regulators to oversee risks to the economy from large, interconnected firms, with the Federal Reserve and Treasury Department in key roles.
The Obama administration had wanted to give the Fed a dominant position as systemic risk regulator, but that stance has softened in the face of widespread lawmaker skepticism.
The Senate has taken no action on the matter.
(For the administration's bill, double-click on: http://www.financialstability.gov/roadtostability/regulatoryreform.html)
(For the House bill, double-click on: http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/FinancialRegulatoryReform/Titles/title_I_FSOC_7-22-2009_fnl.pdf)
Keywords: FINANCIAL REGULATION/PROPOSALS
BANK REGULATION: Bank oversight would be streamlined in the Obama plan with a national supervisor, merging the Comptroller of the Currency and the Office of Thrift Supervision.
The plan would eliminate the thrift charter, although Frank opposes this. Senate Banking Committee Chairman Christopher Dodd wants more radical centralization of bank oversight.
(For the administration's bill, double-click on: http://www.financialstability.gov/docs/regulatoryreform/title-III_Natl-Bank-Supervisor_072309.pdf)
(For the House bill, double-click on: http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/FinancialRegulatoryReform/Titles/title-III_Natl-Bank-Supervisor_072309.pdf)
CONSUMER PROTECTION: A new Consumer Financial Protection Agency would be formed under the Obama plan to oversee mortgages, credit cards and other products and services.
The banking industry is fighting the CFPA more fiercely than any of the other Obama proposals it opposes.
Frank has a bill that pares back the CFPA's scope. His committee was expected to vote on the bill next week.
The Senate has taken no action.
(For the administration's bill, double-click on: http://www.financialstability.gov/docs/CFPA-Act.pdf)
(For the House bill, double-click on: http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/FinancialRegulatoryReform/Titles/title_x_CFPA-Act.pdf)
CREDIT RATINGS AGENCIES: Reliance by regulators on credit ratings would be reduced by repealing legal rules on debt that encourage the use of ratings, under the Obama plan.
The Securities and Exchange Commission is already considering reforms for ratings agencies.
Representative Paul Kanjorski, chairman of the House capital markets subcommittee, has proposed a bill that would let the SEC dictate how agencies determine ratings.
The Senate has taken no action.
Political risk exposure: Moody's Corp, Standard & Poor's, Fitch Ratings.
(For the administration bill, double-click on: http://www.financialstability.gov/docs/regulatoryreform/titleIX_subtC.pdf)
(For the House bill, double-click on: http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/FinancialRegulatoryReform/Titles/title_IX_subt_C_cred_rtg_agencis_07-20-900pm.pdf)
STUDENT LOANS: The House has approved a bill, supported by the Obama administration, to revamp the $92 billion student loan market. The Senate has not acted on the matter.
Political risk exposure: Sallie Mae (SLM Corp), Student Loan Corp, JPMorgan, Bank of America, ITT Educational Services, Corinthian Colleges.
(For the House bill, double-click on: http://edlabor.house.gov/documents/111/pdf/legislation/StudentAidandFiscalResponsibilityAct.pdf)
RESOLUTION AUTHORITY: Obama wants a government mechanism for 'orderly resolution of any financial holding company whose failure might threaten the stability of the financial system.'
The proposal is meant to prevent future case-by-case bailouts like those carried out in the hectic final days of the Bush administration during the financial crisis. Frank has also proposed a bill. The Senate has taken no action.
(For the administration's bill, double-click on: http://www.financialstability.gov/docs/regulatoryreform/title-XII_resolution-authority_072309.pdf)
(For the House bill, double-click on: http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/FinancialRegulatoryReform/Titles/title_XII_resolution_authority_7-23-2009finala.pdf)
CAPITAL AND LIQUIDITY STANDARDS: Financial institutions would have to hold more capital to absorb losses when times are tough, and make themselves more liquid, or be able to move quickly in and out of various holdings, under proposals from the Obama administration. That is in line with an accord reached in September at the Group of 20 summit meeting.
(For the administration's bill, double-click on: http://www.financialstability.gov/docs/regulatoryreform/07222009/titleVI.pdf)
(For the G20 final communique, double-click on: http://www.g20.org/Documents/pittsburgh_summit_leaders_statement_250909.pdf)
SECURITIZATION: Issuers of asset-backed securities would face new reporting requirements and be required to keep at least 5 percent of the performance risk in loans they securitize under the plan, under the Obama reform plan.
Transactions would be more standardized and compensation of securitizers would be linked to long-term performance.
Political risk exposure: Citigroup, Wells Fargo, Bank of America, JPMorgan Chase.
(For the administration's bill, double-click on: http://www.financialstability.gov/docs/regulatoryreform/07222009/titleIX.pdf)
(For the House bill, double-click on: http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/FinancialRegulatoryReform/Titles/title_IX_subt_E_securitization_7-22-2009_fnl.pdf)
HEDGE FUNDS, PRIVATE EQUITY: Obama wants to require hedge funds and other private capital pools to register with the SEC. A bill in the House would empower the SEC in this regard, while exempting venture capital firms from registration.
Political risk exposure: Bridgewater Associates, D.E. Shaw Group, Farallon Capital Management, Citadel Investment Group, Fortress Investment Group and many others.
(For the administration's bill, double-click on: http://www.treas.gov/press/releases/reports/title%20iv%20reg%20advisers%20priv%20funds%207%2015%2009%20fnl.pdf)
(For the House bill, double-click on: http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/FinancialRegulatoryReform/Titles/title_IX_subt_C_cred_rtg_agencis_07-20-900pm.pdf)
INSURERS: The administration has called for a new Treasury Department Office of National Insurance that would monitor the industry and gather data, but not regulate.
Frank's committee is debating a similar bill.
Political risk exposure: Allstate Corp, Travelers Cos Inc, Hartford Financial, MetLife Inc , Prudential Financial Inc.
(For the administration's bill, double-click on: http://www.financialstability.gov/docs/regulatoryreform/07222009/title%20V%20Ofc%20Natl%20Ins%207-22-2009%20fnl.pdf)
(For the House bill, double-click on: http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/FinancialRegulatoryReform/Titles/title_V_Ofc_Natl_Ins_7-22-2009_fnl.pdf)
((Reporting by Kevin Drawbaugh, Karey Wutkowski, Patrick Rucker, Karen Brettell, Rachelle Younglai, John Poirier, Charles Abbott, Chris Doering, David Lawder, Jonathan Spicer) (kevin.drawbaugh@thomsonreuters.com, +1-202-898-8390, +1-202- 488-3459 fax) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.