Asian banks are reviewing relationships with their U.S. counterparts to avoid being caught by tough new American rules on derivatives trading that are about to come into force.
From the start of next year, non-U.S. banks that annually deal in at least $8 billion worth of products such as interest rate swaps with American counterparties are expected to be subject to new derivatives rules in the Dodd-Frank Act.
In practice that means they will need to register as swap dealers with U.S. regulators and abide by their rules on capital requirements and risk management, all of which adds to costs.
“If I have the choice, I just don’t want to deal with a ‘U.S person’,” said a treasury manager at a regional Asian bank.
“We’re still looking at our compliance situation, but it may mean that in future I need to ask all my U.S. counterparties if there’s a way they can change where they book their trades with us”.
A “U.S. person” as defined by the regulation is a relatively broad term, intended by regulators to apply to any person or entity that will have an effect on American commerce.