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Is JPMorgan Chase & Co. (NYSE:JPM) Trying To Escape Swap-Trading curbs For Overseas Derivatives?

Boston, MA 09/12/2014 (wallstreetpr) – Provider of diversified financial services JPMorgan Chase & Co. (NYSE:JPM) is one among the many financial institutions to have been closely watched by the U.S. Treasury Department on a possible move to evade the curbs on swap-trading of overseas derivatives.

Treasury Watching

Treasury Department seems to have been seized of the matter that the banks were resorting to steps to remove guarantees by parent company from their affiliates of overseas. The Department is closely monitoring whether such steps remove the exposure of the American Bank, Bloomberg reported quoting official from the Treasury.

The financial crisis in 2008 has undoubtedly given enough lessons for the regulators and the bankers to check any wrong doings. However, in their efforts to beat the competition, there appeared to be some compromise to find loopholes to escape from the regulatory eyes.

Not only JPMorgan Chase & Co. (NYSE:JPM), other financial institutions like Goldman Sachs Group Inc (NYSE:GS), Citigroup Inc (NYSE:C), Bank of America Corp (NYSE:BAC) and Morgan Stanley (NYSE:MS) were also under the scanner of different regulators.

Derivative Market

Global derivative market has been estimated at $700 trillion. This entices every financial institution to find loopholes in the laws. This results in the banks resorting to changing operations to facilitate trade derivates through other dealers so as to avoid restrictions slapped under the Dodd-Frank Act.

There are differences between guaranteed and non-guarantees by the parent companies. According to the Dodd-Frank Act, trading in overseas affiliates operations in derivates was subject to the financial guarantee of their parent company in the U.S. Therefore, non-guaranteed affiliates invite less scrutiny than guaranteed affiliates or overseas branches.

The restrictions on overseas trading swaps assumed importance in the wake of several financial institutions rescued by the government in 2008 and the fallout due to the losses of a London unit hurting American International Group Inc (NYSE:AIG) very badly.

CFTC Sent Letters

Commodity Futures Trading Commission or CFTC and the Federal Deposit Insurance Corp. were joined by the Treasury Department to review the practice adopted by various banks. CFTC has even sent letters to the JPMorgan Chase & Co. (NYSE:JPM), Goldman Sachs, Citigroup, Morgan Stanley and Bank of America to provide information on the practices adopted to remove any guarantees.

Published by Duncan Oleinic

Duncan Oleinic is from New Yourk. After graduating with a degree in physics, he began his career as an analyst in a broking firm. Through this experience he was able to advance to the role of correspondent for a U.S based financial news provider, where he worked from 2001 to 2007. He subsequently joined a merchant banking firm as a financial analyst focused on valuing unlisted companies in the sub-continent. Over the course of his two years here, he performed valuations of several media companies which were later acquired by peers.

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