Regulators pledge to avoid cross-border clashes over derivatives

* Regulators to meet in January to agree rules phase-in

* Industry body says more progress on coordination needed

LONDON, Dec 4 (Reuters) - Derivatives regulators from major

trading centres promised on Tuesday to minimise cross-border

clashes over their new rules to rein in risks in the $640

trillion sector and give industry extra time to adjust.

World leaders agreed in 2009 to increase transparency by

requiring swaps contracts to be recorded, cleared and traded on

electronic platforms by the end of this month, but not all

countries are ready.

The leaders decided on action because most interest rate,

credit default, commodity and other types of swaps are traded

privately among 15 or so top banks like Goldman Sachs,

Deutsche Bank and HSBC.

This makes it hard for regulators to get a full picture when

things go wrong, as with the collapse of U.S. bank Lehman

Brothers in 2008.

The group of regulators from the EU, Australia, Hong Kong,

Brazil, Singapore, Japan, United States, Canada and Switzerland,

met in New York last week. They mapped out, in a statement

released on Tuesday, how they intend to minimise the application

of inconsistent and duplicative rules.

Banks fear having to comply with different rules and there

are already signs some Asian customers are avoiding U.S. banks.

The regulators said in the statement they would consult each

other before deciding if a swap must be cleared, a process

backed by a default fund to minimise fallout from any default.

They pledged to recognise each other's rules and agree on

common phased introductions of the reforms.

"We will consider providing appropriate transitional

implementation periods for entitities in jurisdictions that are

implementing comparable regulations, supervision and

comprehensive oversight," the statement said.

The regulators will meet in Brussels early next year to look

at "options to address identified conflicts, inconsistencies and

duplicative rules".

They will also tell each other in January when they intend

to start applying the new rules and the transition periods

markets will be given.

As part of the same process of averting duplication

Britain, France, Japan and the European Union in October called

on the United States regulator, the Commodity Futures Trading

Commission (CFTC), to limit the cross-border reach of some of

its new derivatives rules.

The International Swaps and Derivatives Association (ISDA),

the main industry body for the sector, said on Tuesday it

welcomed efforts to align supervisory approaches.

"As the regulatory statement suggests, considerable further

progress needs to be made, and we look forward to engaging

constructively with policymakers towards that end," ISDA said.

One derivatives industry official, speaking on condition of

anonymity, said the statement failed to say what would happen if

a country decides to make clearing mandatory while regulators

elsewhere object.

The official said the regulators also conceded that

"national authorities would still have ultimate responsibility

and authority to protect against all sources of risk to their

markets".

This is seen as offering reassurance to the CFTC, which

faces a Congress leery of the United States being bound by

foreign rules.

Source: http://news.yahoo.com/regulators-pledge-avoid-cross-border-clashes-over-derivatives-180935529--sector.html

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