Delay Seen in Swaps Disclosure Regulations

By Rehm, Barbara A. | American Banker, June 9, 1994 | Go to article overview

Delay Seen in Swaps Disclosure Regulations


Rehm, Barbara A., American Banker


WASHINGTON -- Rules requiring banks to expand disclosures of derivatives activities are likely to be delayed until March 1995, six months after the original target date.

Bank regulators plan to meet today to consider postponing the new reporting requirements. Officials said Wednesday that they need the extra time to decide which disclosures would give the agencies a better grasp of the risks posed by derivatives.

The industry has been pushing for the delay, arguing that banking regulators should put off new reporting requirements until uniform disclosures can be agreed on by the many regulatory entities overseeing derivatives.

Avoiding Confusion

This is critical to ensure that the nature and extent of derivatives activities be clarified, rather than confused," Geoffrey M. Fletcher, managing director at Bankers Trust Co., wrote in a comment letter to regulators.

A delay "is also necessary to avoid the undue reporting burden that would result if different disclosures were required," Mr. Fletcher wrote.

The changes would require banks to spell out their derivatives activity in quarterly call reports. A final rule detailing the changes is not expected until the third quarter, according to a regulator working on the proposal. Pushing the changes back to March would give banks enough lead time to adapt to call report adjustments.

The Financial Standards Accounting Board is expected to release new derivatives disclosures in December. The Securities and Exchange Commission also is tinkering with changes to derivatives reporting.

Pressure from Congress

Bank regulators, under pressure from Congress, proposed a two-phase expansion of the call report on March 9. The first disclosures were scheduled to kick in with the September report and a second set were due next March.

The proposal was released by all the banking agencies acting under their umbrella group, the Federal Financial Institutions Examination Council. Comments were due May 9.

The proposed disclosures are designed to gather the data needed to judge how much credit, liquidity, and systemic risk is being posed by derivatives.

But regulators were under the gun when they wrote the proposal and did not have time to analyze the new disclosures many banks made in their yearend reports. So the form of the new disclosures could change significantly before they are formally required.

While big banks argued for more time, small banks called the proposed $100 million threshold too low.

Regulators plan to exempt banks with less than $100 million in assets from the new disclosures. …

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