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AFP Press Release

Risk Management Practices Protected in House Derivatives Reform


Bethesda, Maryland, December 11 -- Members of the U.S. House of Representatives have taken an important step toward securing access to vital corporate risk management tools with the passage of the Wall Street Reform and Consumer Protection Act of 2009(H.R. 4173).

Over the past year, the Association for Financial Professionals (AFP) has worked with legislators to explain the vital role over-the-counter (OTC) derivatives play in our members' businesses. While OTC derivatives are often traded speculatively, corporate treasurers prudently use derivatives products to hedge risk, and, as such, there is a critical need to preserve their access to these resources. AFP's concerns were reflected in the passage of an amendment to the final bill that will exempt corporate end-users from regulations meant to reduce systemic risk by overseeing major participants in the OTC derivatives markets: swap dealers, large traders and banks.  Rep. Scott Murphy (D-NY) offered the amendment, which was approved by a vote of 304-124.

Specifically, AFP has called for all bona fide hedges to be exempt from regulations that would demand clearing or exchange trading requirements, which may make hedging impractical under present accounting rules. AFP also contends that margin and capital agreements should be negotiated on a case-by-case basis between counterparties, rather than set by federal regulators. AFP plans to work with the Senate to build on the House's efforts.

Additionally, the bill would:

  1. Provide for a Financial Stability Oversight Council and the consolidation of bank regulators;
  2. End the obsolete practice prohibiting the accrual of interest on business checking accounts, a reform AFP has advocated for more than a decade and;
  3. Expand transparency and accountability for the credit rating agencies, whose failures to provide timely and accurate ratings played a major role in contributing to the economic crisis.

AFP President and CEO Jim Kaitz applauded the House's efforts toward securing America's financial markets by passing the reform package.

"We appreciate the House's attempt to balance the need to mitigate systemic risk and the recognition of the vital importance of OTC derivatives in prudent corporate risk management," Kaitz said. "Additionally, we continue to support initiatives that seek to increase competition, transparency, and accountability for rating agencies"  

About AFP 

The Association for Financial Professionals (AFP) serves a network of more than 16,000 treasury and finance professionals. Headquartered in Bethesda, Md., AFP provides members with news, economic research and data on the evolving world of treasury and finance, as well as world-class treasury certification programs, networking events, financial analytical tools, training and public policy representation to legislators and regulators. AFP is the daily resource for treasury and finance professionals.

AFP's global reach extends to over 150,000 treasury and financial professionals worldwide, including AFP of Canada, AFP's gtnews, an online resource for the treasury and finance community, and the London-based bobsguide, a financial IT solutions network.

Contact: Jonathan Starkey
(301) 961-8669 / jstarkey@afponline.org 

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