WASHINGTON — Industry representatives are praising a recent move by regulators to provide more time to comply with pending swap restrictions, but many said the fix highlights a lingering problem with the rules that will effectively penalize foreign banks operating in the U.S.

Under the Dodd-Frank Act, banks must move swaps activities — excluding certain hedging deals — into affiliates without U.S. government support. Regulators had initially set a mid-July effective date, but the Office of the Comptroller of the Currency — as allowed by the financial reform law — said recently it will grant extensions of up to two years. Other regulators are expected to follow suit.

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