Ag Committee Tackles Derivatives
OTC derivatives reform was the topic of a Senate Agriculture Committee hearing Wednesday. Treasury Secretary Timothy Geithner was among the witnesses to testify. Also on the list: Jiro Okochi, CEO of Reval, a derivative risk management and hedge accounting provider. Okochi told the full Ag Committee how the proposed legislation would impact derivatives end users.
“That was my first time testifying before Congress and it was quite an honor and privilege,” he said. “The consensus I sensed from the Senators’ questions to me and Geithner’s responses to their questions was they understand there needs to be special considerations for end users. The senators clearly recognize that end users weren’t to blame so hopefully the bill will have fairly broad exemptions.”
Okochi proposed adding a risk management policy stipulation to the legislation to avoid Congress creating carveouts — or, worse, leaving carveouts up to regulators. He also suggested exempting derivatives younger than 12 months, including FX forwards and swaps, single-currency interest rate swaps and commodity swaps that don’t physically settle. “These one-year swaps generally don’t pose much systemic risk,” said Okochi, who also reminded the committee that not exempting swaps sold for margining and capital will lead to the margining being passed on to the corporates, “which defeats the purpose,” he said.
Tags: Jiro Okochi, OTC derivatives, Senate Agriculture Committe, Timothy Geithner
