Rep. Scott Garrett (R-NJ), Chairman of the Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, delivered the following opening statement today at a hearing to review the indemnification provisions in Title VII of the Dodd-Frank Act relating to the global swaps market.
"Clearly, Dodd-Frank is not perfect and it requires continued scrutiny, especially Title VII. I have held numerous hearings and sponsored or co-sponsored a number of bills, many of which have been bi-partisan in nature, to address the problems and to clarify congressional intent in Title VII. Today, we are here to discuss another problem presented by Dodd-Frank that, while not as high profile as the others, requires a correction nonetheless: the issue of Indemnification.
"Thankfully, the CFTC and the SEC as well as many of my colleagues on both sides of the aisle now recognize that a repeal of the indemnification provisions in Title VII is required in order to avoid fragmentation in the collection of swap data and to bring regulatory transparency to the swaps market.
"While it is important for U.S. regulators to collect and analyze swap data, it is equally important for U.S. regulators to share data with foreign regulators in order to thoroughly understand and monitor where the risk is concentrated in the global swaps market.
"And while today's indemnification issue is more technical in nature, the issue of extra-territoriality in global swaps market regulation certainly is not. To date, neither the CFTC nor the SEC has proposed a rule that defines the scope of Dodd-Frank's extra-territorial reach. The failure to define the reach of clearing, execution, capital, margin, Volcker, and reporting obligations is preventing market participants from taking the steps necessary to make sure their operations comply with Dodd-Frank. To correct this problem, I co-sponsored a bi-partisan bill with Mr. Himes that brings certainty to these issues that will be marked up in the full committee next week.
"I cannot be clear enough about this: Consistent regulation is fundamental to the efficient functioning and successful regulation of derivatives U.S. capital markets. And, in order to reduce systemic risk and limit opportunities for regulatory arbitrage as well as the loss of jobs overseas, we cannot afford an inconsistent approach on issues of extraterritoriality among international regulators.
"I am hopeful that we can move this Bill through the house very quickly and that the Senate will finally realize that Dodd-Frank is not perfect and that it requires some change for our markets to function properly and for regulators to understand where and how the risk is concentrated in the system. With that, I look forward to hearing testimony from our witnesses today from the SEC, CFTC and the Depository Trust Clearing Corporation."