Washington – The Coalition for Derivatives End-Users today called upon Congress to enact amendments to the Dodd-Frank Wall Street Reform and Consumer Protection Act to protect companies that use derivatives to manage business risk, while more effectively focusing new regulations on the systemic risks the law was intended to address.
As part of a major effort to champion reform, corporate treasurers from 19 companies are in Washington, DC today to meet with members of the U.S. Senate to urge enactment of much-needed amendments to the Dodd-Frank Act.
“The Coalition for Derivatives End-Users is committed to reforms that strengthen U.S. financial markets, while allowing U.S. companies to invest, expand and create more jobs,” said Matt Miller, Vice President for Tax and Finance at Business Roundtable. “We support refinements to the Dodd-Frank Act that focus on the real sources of systemic financial risk and protect mainstream American companies that use derivatives to prudently manage their operations.”
Businesses groups added that companies should not be confronted with a minefield of new regulations when they attempt to use derivatives in ways that help raise funds and make productive investments. The reforms they support are consistent with the intent of Congress when the Dodd-Frank Act was passed nearly two years ago.
“Simply put, end-users did not cause the problems that the Dodd-Frank Act was seeking to address,” said Carolyn Lee, Senior Director of Tax Policy with the National Association of Manufacturers. “Manufacturers all across the country engage in derivatives trades to hedge against business risk and to mitigate exposure to ever-changing commodities prices, interest rates and currency valuations. End-users strongly urge the Senate to move these common-sense clarifications to ensure that as the agencies implement the Dodd-Frank Act they adhere to the clear intent is the bill's authors and exempt end-users, like manufacturers, from these burdensome and costly requirements."
Jess Sharp, Managing Director of the Center for Capital Markets Competitiveness at the U.S. Chamber of Commerce, added: “Unfortunately, banking regulators have made it clear that they believe they cannot provide the relief for Main Street businesses that many members of the U.S. House and Senate, both Republicans and Democrats alike, thought they had already approved as part of Dodd-Frank. Today the Coalition for Derivatives End-Users will encourage lawmakers to act fast to ensure that manufacturers, energy and agriculture companies, and other businesses that rely on derivatives as a risk mitigation tool are not hit with a bill they cannot afford.”
The reforms welcomed by the Coalition for Derivatives End-Users were included in two bills passed by the House in March and are described below:
H.R. 2779, a Bill to Exempt Inter-Affiliate Swaps from the Regulatory Requirements of Title VII of the Dodd-Frank Act, introduced by Representatives Steve Stivers (R-OH) and Marcia Fudge (D-OH), would prevent internal, inter-affiliate trades, which do not create risk to the financial system, from being subject to regulatory burdens that were designed to be applied to market-facing trades. Click here to view the Coalition for Derivatives End-Users letter of support for H.R. 2779.
- H.R. 2682, the Business Risk Mitigation and Price Stabilization Act of 2011, introduced by Representatives Michael Grimm (R-NY), William Owens (D-NY), Gary Peters (D-MI) and Austin Scott (R-GA), would create a partial exemption from margin requirements for derivatives end-users. Click here to view the Coalition for Derivatives End-Users letter of support for H.R. 2682.
The Coalition for Derivatives End-Users includes the following major U.S. business associations:
- Agricultural Retailers Association
- American Petroleum Institute
- Business Roundtable
- Commodity Markets Council
- Financial Executives International
- National Association of Corporate Treasurers
- National Association of Manufacturers
- The Real Estate Roundtable
- U.S. Chamber of Commerce