WASHINGTON -- A US federal council charged with examining systemic financial risks is expected later Tuesday to discuss losses made by JP Morgan Chase of at least $2 billion from credit derivatives trades, according to a senior administration official.
The Financial Stability Oversight Council, made up of bank and securities regulators, plans to privately consider the losses, announced earlier this month, and how they pertain to a proposal that seeks to ban speculative trades by big banks, the official said Monday.
The proposal is known as the Volcker Rule after former Federal Reserve chief Paul Volcker, who suggested the idea.
The discussion comes after the nation's futures market regulator said Monday that it is investigating JP Morgan Chase's use of credit derivatives by the bank's chief investment office.
Gary Gensler, chief of the Commodity Futures Trading Commission (CFTC), told reporters about the investigation after speaking at the annual Financial Industry Regulatory Authority conference.
Gensler did not elaborate on what the CFTC was examining, saying the agency's investigation will join a review being conducted by the Securities and Exchange Commission (SEC) and the FBI.
The CFTC chief also indicated that he may have concerns with how some interpret a key part of the Volcker Rule, which seeks to prohibit big banks from trading stocks and derivatives with their own money and significantly limit banks' investments in hedge funds and private-equity funds.
Bank and securities regulators introduced a Volcker Rule proposal in October, but the CFTC did not propose its companion proposal until January.
Critics argue that a key provision in the proposed rules that permits investment hedging on a "portfolio basis" is a major loophole that allows big banks to violate the intent of the statute and continue speculating, with taxpayers and the financial system potentially on the hook if trades go sour.
The senior administration official said regulators are still trying to figure out exactly what happened at JP Morgan but that it was an example of a failure of their risk-management systems that can help inform regulators about how to write a strong Volcker Rule.
To read more, go to MarketWatch.
Financial Stability Oversight Council, JP Morgan Chase, Paul Volcker, Volcker Rule, Commodity Futures Trading Commission, Financial Industry Regulatory Authority, CFTC, credit derivatives, senior administration, senior administration official, chief investment, Volcker Rule proposal, regulators, banks
No comments:
Post a Comment