Magazine article American Banker

Curbing Derivatives Would Curb Credit, Panel Told

Magazine article American Banker

Curbing Derivatives Would Curb Credit, Panel Told

Article excerpt

WASHINGTON -- Limiting banks' investment in derivatives could result in less credit for customers, a top banker warned the Senate Banking Committee on Friday.

Richard B. Roberts, executive vice president and treasure of Wachovia Corp., Winston-Salem, N.C., added that restrictions on derivatives could force banks to take on more interest rate risk, which eventually could threaten the safety and soundness of the system.

"Any effort to restrict the ability of banks to engage in derivative transactions would increase costs and burdens to the industry and the communities served by these institutions," concluded Mr. Roberts, who testified on behalf of the American Bankers Association.

Not surprisingly, nearly all of the banking and financial markets representatives testifying before the panel agreed that further legislation in the area of derivatives is not necessary.

"There do not appear to be any gaps in the authority of federal regulators to deal with any issues or circumstances that might arise in the markets for these instruments," said Robert D. McKnew, executive vice president of Bank of America.

The only person in the room calling for legislation was Bonnie Ridley Kraft, president of the Government Finance Officers Association. Her recommendation, however, focused only on intensifying scrutiny of investment advisers.

"Congress can improve investor protection by the expeditious enactment of investment adviser legislation to provide for more frequent inspection and additional oversight of investment advisers," Ms. …

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