US nears deal on derivatives crackdown
Banks looked increasingly likely to face some limits on swap trading, as a proposal to rein in risky business practices gained traction among US lawmakers.business Updated: Jun 15, 2010 22:06 IST
Banks looked increasingly likely to face some limits on swap trading, as a proposal to rein in risky business practices gained traction among US lawmakers.
A revised proposal from Democratic Senator Blanche Lincoln could force some Wall Street banks to spin off lucrative over-the-counter derivatives trading operations.
The proposal would limit what kinds of activities would have to be spun off, allowing banks to continue hedging their own risks in-house using swaps, among other changes.
Meanwhile, the European Union is undecided on whether to force banks to trade derivatives on an exchange to improve transparency and curb risk.
"This is one of those areas we might come up with a different approach," Patrick Pearson, head of financial markets infrastructure at the European Commission, said.
"It does not reduce counterparty risk, it just redistributes the risk."