SIFMA provides comments to the U.S. House of Representatives supporting H.R. 992, the Swaps Regulatory Improvement Act.
Section 716 of the Dodd-Frank Act requires commercial banks to push out or remove certain swaps activities from the bank and establish and capitalize a separate affiliate. H.R. 992 would modify Section 716 by requiring only structured finance swaps based on asset-backed securities to be pushed out of banks and not applying Section 716 to equity or commodity swaps.
SIFMA shares concerns that clients will migrate their swaps contracts to other entities, which are not subject to prudential regulation by federal regulators. This migration could increase systemic risk. As written now, Section 716 reduces the ability of banks to mitigate their own risks and would increase funding costs.