Clarifications on Payment Risk Are Endorsed at House Hearing
WASHINGTON - Moving to fend off a regulatory turf war, officials from the Treasury and the Federal Reserve Board have endorsed clarifications to the banking reform bill's section on reducing payments-system risk.
In testimony this week to the House Agriculture Committee, Treasury Under Secretary Robert Glauber and Fed Associate General Counsel Oliver Ireland accepted changes sought by the Commodities Futures Trading Commission.
The witnesses said the revisions would protect the futures agency's authority to forbid certain types of netting arrangements in payments-system settlements. The Senate version of the bill contains this clarification.
A little-noticed subtitle affirms the validity of agreements among financial institutions to settle payment transactions with a single net payment or credit each day.
These so-called netting contracts would be enforced even if one party were seized by the government or entered bankruptcy.
The House agriculture panel has until Sept. 27 to approve, amend, or reject a few portions of the banking bill that fall under its jurisdiction.
Futures commission merchants and commodities clearing organizations, whose activities are overseen by the CFTC, often sign on to netting contracts. So do depository institutions and securities brokers, dealers, and clearing organizations.