WASHINGTON — Rep. Maxine Waters, R-Calif., is urging the Commodity Futures Trading Commission to examine banks' efforts to sidestep U.S. swaps trading rules.

The move comes after several recent reports examining an effort by banks to change agreements at foreign guaranteed affiliates to remove references to a guarantee by the U.S. bank to avoid new, stricter domestic oversight.

The top Democrat on the House Financial Services Committee warned in a letter Thursday that having the transactions take place under the foreign affiliates transfers risk back to the United States "to the same degree as if the transaction were entered into directly by the U.S. bank."

The CFTC should investigate the removal of U.S. guarantees in the agreements, "focusing on the substance, rather than form, of the arrangements between U.S. banks and their foreign affiliates," Waters wrote to Timothy Massad, chairman of the agency. "In particular, I request that the CFTC consider the presence of other non-traditional guarantees and arrangements that, viewed at the entity-level, support the creditworthiness of foreign affiliates."

Waters added: "Given that large Wall Street banks routinely transact half of their swaps activities through foreign subsidiaries, it is important that U.S. market regulators both work with each other, and with global regulators, towards the goal of international regulatory convergence. As that process continues, we must ensure that U.S. banks are not importing unregulated derivatives risk back to the United States via any changes to the guarantee relationship with their foreign affiliates."

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