The European Union is urging the U.S. to change course on a planned swaps rules that it says would leave banks saddled with extra costs and incompatible legal obligations.
EU regulators are concerned that time is running out for the U.S. Commodity Futures Trading Commission to amend or delay requirements that stretch beyond U.S. borders, ahead of a July 12 deadline, an EU official said.
The international reach of CFTC swap-trading requirements has been one of the most controversial elements of the U.S. Dodd-Frank Act rules, prompting opposition from financial companies including Goldman Sachs Group Inc. and Barclays Plc, as well as EU, Asian and South American regulators.
Jonathan Faull, the commission official responsible for financial-services rules, wrote last month to CTFC Chairman Gary Gensler urging him to allow more time for international talks.
Michel Barnier, the EU’s financial-services chief, will raise the derivatives rules with officials during a visit to the U.S. next month, the official said.
The EU is seeking an agreement with the U.S. that its banks can be exempted from the CFTC rules on the basis that EU standards are equally rigorous, Chantal Hughes, a spokeswoman for Barnier, said in an e-mail.
“On the great majority of financial-services issues, the EU and U.S. are very much in line with each other,” Hughes said.
The EU is concerned that banks might face overlapping reporting requirements and incompatible restrictions on where to clear derivatives trades in the $633 trillion global market, according to the official, who can’t be named in line with official policy.
One possible outcome is that the U.S. rules could prevent trades from being cleared in the EU, in turn activating EU rules that would prevent them from being cleared in the U.S., placing banks in a legal quandary, according to the official.
Some finance chiefs have even said they are worried about travel to the U.S, given that they could be deemed in breach of its rules and prosecuted, said the official, who did not name the companies or individuals involved.