Magazine article American Banker

Congressional Overkill Could Sap the Benefits of Swaps, Experts Say

Magazine article American Banker

Congressional Overkill Could Sap the Benefits of Swaps, Experts Say

Article excerpt

BOCA RATON, Fla. - As Congress moves to regulate the burgeoning derivatives market, securities experts yesterday warned that legislative overreaction could sap benefits to banks and other institutions using the complex securities.

Speaking at the annual meeting of the Securities Industry Association, experts said no law will completely settle concerns that derivatives threaten the security of banks and other users.

"I'm not sure there will ever be a resolution of all the questions that are out there," said Brandon C. Becker, director of market regulation at the Securities and Exchange Commission.

Concerns Called |Overblown'

Though he declined to predict specific regulation, Mr. Becker said it is certain that regulators want players in the $4 trillion a year global derivatives market to improve capital standards, clarify accounting rules, and tighten internal credit standards.

Others participating in the panel discussion here at the posh Boca Raton Resort and Club agreed that regulation was inevitable, but called "overblown" concerns that the failure of a major player threatens all users of derivatives.

Instead, Steven M. Benardete, managing director of derivatives at Morgan Stanley & Co., warned that the greatest risk is the legal enforceability of contracts between two parties in a transaction.

U.K. Court Case Cited

He noted that several municipalities in the United Kingdom reneged on agreements, and the courts stood behind them. As a result, Mr. Benardete said, many players enter only those contracts enforceable under U. …

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