WASHINGTON--The Treasury Department is monitoring U.S. banks
that are shifting some trading operations overseas to avoid tough
U.S. swaps rules, according to a department official.
Banks, including Citigroup Inc., Goldman Sachs Group Inc., and
J.P. Morgan Chase & Co. have revoked their policy of
guaranteeing some swaps issued by foreign affiliates, primarily in
London, eliminating ties to their U.S. parent.
Treasury is monitoring the practices to determine if they pose
potential risks to parent companies in the U.S., the official said.
Treasury Secretary Jacob Lew heads the Financial Stability
Oversight Council, which has authority to address activities that
pose a systemic risk to financial markets.
The moves by banks to revoke guarantees means any liability for
those swaps lies solely with the offshore operation, which the
banks have said will protect the U.S. parent from contagion. Yet
without that tie, the swaps don't fall under U.S. jurisdiction and
aren't subject to strict rules set by the 2010 Dodd-Frank financial
law which aims to bring transparency to the multitrillion-dollar
swaps market.
Write to Andrew Ackerman at andrew.ackerman@wsj.com and Victoria
McGrane at victoria.mcgrane@wsj.com
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