WASHINGTON — A rule adopted by the Commodity Futures Trading Commission on Nov. 21 was supposed to end confusion over the enforceability of banks’ swaps contracts.

But the House Banking Committee isn’t so sure.

“There is some concern about whether this rule could increase uncertainty about swaps deals rather than eliminate it,” a House Banking spokesman said. Committee staff members are reviewing the rule, he said, trying to determine whether it “would in fact be contrary to our desire to eliminate legal uncertainty in certain swaps.”

The banking industry, which is one of the primary players in the $90 trillion international market for swaps contracts, has long been concerned that the enforceability of swaps might be compromised if the CFTC tried to assert control over them. The possibility exists because swaps are similar to futures contracts, over which the CFTC has supervisory authority.

Bankers had pinned their hopes on the Commodity Futures Modernization Act of 2000, which would have granted broad legal protections to swaps and given substantial regulatory relief to futures exchanges. But though the bill passed the House 377-4 in October, it has been blocked in the Senate, and its prospects of passage this year look slim.

In the face of congressional inaction, the futures commission took matters into its own hands, adopting three regulations meant to reform market structures. Chairman William J. Rainer called the move “an important step in revamping the commission’s approach to regulation.”

The rules include an amendment saying that even a contract illegal under futures commission regulations may still be enforceable.

According to Andrew Lowenthal, the commission’s chief of staff, “The biggest harm that existed under the old regime was the possibility that a contract participant who owed money would walk away” if a swaps contract was deemed to be an illegal futures agreement.

The amendment “severely limits the attractiveness of using the Commodities Exchange Act to walk away from a true contractual obligation,” Mr. Lowenthal said.

The rule, which will take effect in February, will also exempt a broad range of contracts, including swaps, from the agency’s oversight. It is that section of the rule that is causing the most concern.

Some observers said that by outlining a category of exempt transactions the agency created the assumption that it has authority over certain other banking products in the absence of an explicit exemption.

Additionally, they claim, it built a framework that may affect products that banks develop in the future.

Mr. Lowenthal said concerns about legal uncertainty are unfounded, and were not raised in the comment letters the commission received when it proposed the rule. “We had over 70 comment letters. and none of them mentioned that,” he said. “We felt this was an appropriate and very positive step that we could take.”

But he agreed that enactment of the Commodity Futures Modernization Act “would be the best possible answer to all of these questions.”

The sentiment that congressional action would be preferable to an agency rule was widely expressed.

The Treasury Department’s under secretary for domestic finance, Gary Gensler, urged Congress to act on the pending legislation, saying, “The CFTC did what it could do through rule-writing, but it cannot act with the force of the President signing a bill. It is still better to do this statutorily.”

A statement issued by the International Swaps and Derivatives Association called the futures commission’s rule “a very helpful step for the OTC derivatives markets.”

“In the absence of legislation, which is still needed to provide the broadest possible legal certainty protection, the [rule] is a constructive measure ensuring that OTC derivatives transactions will continue to be enforceable in accordance with their terms,” the trade group said.


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