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The Resource for the Global Finance Profession

Dodd-Frank

AFP fully supports effective regulation and oversight of financial markets. As the voice of treasury and finance professionals, we continue to engage with legislators and regulators to offer our insight in areas where proposed regulations may affect financial risk management and capital access operations for businesses.

Following the 2008 financial crisis, reforming our financial markets was a clear and necessary response. As regulators continue to propose rules to implement the Dodd–Frank Wall Street Reform and Consumer Protection Act, AFP will make regulators aware of the concerns of the treasury and finance profession and inform our members of final regulatory changes. Encompassing over 2,000 pages, many rules of which have yet to be implemented, Dodd-Frank restructures certain practices in a manner that, while well-intended, can obstruct capital liquidity and responsible financial risk management for businesses.

With regard to the derivatives provisions included in Dodd-Frank, AFP maintains that these products are essential risk management tools used by end-user financial professionals to mitigate price volatility of goods and services bought and sold. Nonetheless, we applaud the efforts of the Obama administration to bring transparency and stability to the OTC derivatives market, prevent excessive speculation, and secure derivatives markets.

As experts on financial risk management for businesses, AFP members need to preserve the use of interest rate swaps, foreign exchange swaps and other OTC derivatives as safe methods for prudent risk management. We seek to ensure the preservation of the end-user exemption; and so do not support over-burdensome margin requirements thereof.

AFP members have also voiced concerns with the consequences on market-making that might be felt as a result of provisions within Dodd-Frank, such as the Volcker Rule. Since the market has yet to feel the full effect of many Dodd- Frank regulations, we fear that certain ambiguous rules awaiting implementation could adversely affect overall market liquidity, which for businesses, is critical for day-to-day cash management.

Any rules that tighten market liquidity could impact credit access and the cost at which businesses issue debt, and therefore, should be delicately approached. Further, it is unclear which bank services may be eliminated or impacted if financial institutions are forced to adjust their offerings. Corporate treasurers rely on the liquidity that banks offer, and fundamentally changing banking functions could greatly weaken markets. AFP will continue to monitor and engage with rule-makers and lawmakers during implementation of Dodd-Frank to assure sensible regulations.

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