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Tag >> Dodd-Frank
Companies that look to banks for loan facilities are the ones that ultimately will pay for rising bank regulatory costs under Dodd-Frank, and a group of lenders are in the process of changing loan document standards to ensure that is the case.
New corporate loan documents are already seeing clauses added to shift the cost of Dodd-Frank compliance from the bank to the borrower, according to a report on Tuesday in the Wall Street Journal.
Although it published a timeline in September for implementing changes under the Dodd-Frank Act, the SEC was not wholly successful in meeting it.
In fact, the regulatory body missed on a broad range of changes that it expected to have done by year-end. For example, the creation of a number of new offices and units under the SEC was put off due to budgetary uncertainty, according to an update by lawyers at law firm Leonard, Street and Deinard.
Companies with international operations could see an impact when it comes to their foreign exchange management should legislation under Dodd-Frank go forward which would require that all standardized FX swaps be moved onto regulated exchanges, and additional legislation requiring the market to be jointly overseen by the CFTC as well as the Federal Reserve system.
Three large trade organizations are lobbying the US Treasury to exempt foreign exchange swaps and forwards from the new regulations—which will require many other OTC derivatives to be moved onto exchange trading systems.
Companies in Europe have been largely spared being forced to clear all their derivative contracts on centralized exchanges. New regulations announced last week by the European Commission on OTC derivatives, central counterparties and trade repositories largely focused on financial firms. But there was a significant space devoted to corporate users of derivatives.
The new regulations will create three categories of non-financial derivatives user: those who do not need to inform the authorities about their derivatives exposure; those that will have to inform the authorities but can still clear their trades OTC; and those who are such heavy users of derivatives that they will have to behave like banks and trade them on exchanges and have the contracts centrally cleared.
The FDIC and SEC are working hard to enact government-mandated regulatory reform for the US ABS markets as called for in Dodd-Frank. However, the two agencies, along with four other agencies that oversee the ABS markets in some way, each have proposed specific guidelines that interpret how market reform should be implemented.
Derivatives have long been a critical tool for many companies managing risks, such as interest rate and foreign exchange. On Thursday, we looked at the potential impact of fluctuations in commodities prices on current and future corporate commodities hedging plans.
However, it is not just prices that affect hedging programs, and many companies worldwide are on tenterhooks, waiting to see how global rules on OTC derivatives will develop.
The Dodd-Frank Act may have gone a little further on some issues than many people had anticipated. But one potential issue that did not see meaningful change is the separation of the chairman and CEO functions.
The Act requires that the SEC issue rules requiring each public company disclose in its annual proxy materials the reasons why the company chose to have either the same person, or separate people, serve as the Chairman and CEO.