WASHINGTON — The president of a small Atlanta-based bank testified to Congress on Wednesday that the derivatives provisions in the Dodd-Frank Act could hinder the bank's ability to manage risk and serve its clients.
Douglas Williams, president of Atlantic Capital Bank, threw his support behind two bills that would make revisions to the financial-reform law in an effort to narrow the impact of the new derivatives rules.
"Neither our use nor our customers' use of derivatives poses systemic risk," Williams told the House Agriculture Committee in written testimony.
According to Williams' testimony, 1,071 bank and trust companies in the United States use derivatives. That's out of roughly 7,400 banks nationwide.
Small banks use interest rate derivatives, foreign exchange derivatives, and less frequently, commodity derivatives, Williams said. Atlantic Capital Bank uses derivatives to hedge the interest-rate risk associated with loans it makes.
Williams said that small banks rarely use credit derivatives, seeking to distance the small-bank sector from the products blamed for insurance giant AIG's demise in 2008.
He expressed concern that certain rules proposed by the Commodity Futures Exchange Commission could unnecessarily jeopardize his bank's ability to manage risk, which could to a contraction in lending. In particular, Williams is worried that his bank will be considered a "financial entity" or a "swap dealer" under Dodd-Frank's provisions.
Neither of the bills that Williams supports has been introduced yet in the House. The CFTC did not testify at Wednesday's hearing.