02/14/2018 | Press release | Distributed by Public on 02/14/2018 17:13
Washington, DC- Today, Senate Finance Committee Chairman Orrin Hatch (R-UT) introduced legislation to provide regulatory relief to small businesses that manage foreign exchange. Hatch's bill (S.2428) exempts certain small businesses from overbearing regulations without compromising the overall health of the financial system.
'The Dodd-Frank Act instituted a number of reforms, but it also created many unintended consequences that hurt small businesses,' said Hatch. 'It's important to re-examine rules that are not working as intended, and make adjustments provided the overall level of resilience is maintained. My bill does just that. Specifically, this legislation provides the same exemption to small businesses that Congress has already granted to larger financial institutions.'
Statements of Support
Lane Beattie, President and CEO, Salt Lake Chamber:
'Senator Hatch has been a champion of small and medium-sized businesses in Utah. Dodd-Frank had many unintended consequences that have hurt small financial firms who were not the cause of the financial crisis. This is a commonsense bill that will make it easier for businesses in Utah to manage their foreign exchange when importing and exporting their goods and services. The Salt Lake Chamber strongly encourages the passage of this most timely and appropriate bill.'
Al Manbeian, Managing Partner, GPS Capital Markets, Inc.:
'Small and medium-sized companies that are engaged in global commerce are vital to the US economy. More and more of these companies are turning to firms specialized in foreign exchange to manage the FX risks inherit in international business. We appreciate Senator Hatch introducing legislation that will allow these financial entities to operate efficiently and effectively in the marketplace.'
Small businesses that provide products and services to commercial end-users struggle to comply with margin rules intended for large financial firms. New variation margin requirements were enacted in 2010, pursuant to the Dodd-Frank Act, but the rules only became effective in 2017. The margin rules, which were added to the Commodity Exchange Act of 1936, were designed to bring greater stability to major foreign currency markets and major swap participants.
In 2015, Congress exempted banks, credit unions, savings associations, and farm credit system institutions with assets of $10 billion and less from variation margin requirements, as the rules were more burdensome than necessary for small financial entities. That exemption, however, did not extend beyond those specific institutions.
The bill provides the exemption to even smaller financial entities dealing with foreign exchange swaps, specifically, those with $1 billion or less in total assets that are not explicitly the aforementioned institutions. The adjustment would allow qualified small financial entities dealing with foreign exchange greater regulatory consistency with their competitors, which better allows them to grow their businesses and serve their customers and communities.