Registration of UBS AG (UBSN) and Credit Suisse Group AG (CSGN)’s swap businesses with the U.S. Commodity Futures Trading Commission may be irreconcilable with Swiss practices, the Swiss government’s financial regulator said in a letter to CFTC Chairman Gary Gensler.
The Swiss Financial Market Supervisory Authority said it has “serious doubts” about the extraterritorial effects of registration required under the Dodd-Frank Act in a letter dated July 5 and received by the CFTC on July 16. Reporting requirements proposed by the CFTC may threaten Swiss privacy and data protections, the letter said.
The Swiss regulator, known as Finma, is “particularly concerned” about margin rules for trades that are not checked by a third party, according to the letter.
“If such margin requirements are applied to a Swiss-based entity, this may duplicate the requirements and may possibly conflict with international and domestic capital adequacy rules,” Patrick Raaflaub, Finma’s chief executive officer, and Mark Branson, head of its banks division, said in the letter.
Banks that deal in swaps may be required to register with the CFTC in September. Registration could be “particularly challenging” for UBS, Switzerland’s largest bank, which carries out swaps through a branch network rather than foreign affiliates, according to the letter.
UBS is preparing to move its derivatives business to a separate legal entity, UBS Limited London. The process will probably take “several years,” the letter said.
Raaflaub and Branson said they are confident the CFTC and Finma can find a suitable alternative to the rules, and suggested the registration of a U.S.-based information transfer agent as a possible solution.
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