I
105TH CONGRESS
2D SESSION
H. R. 4062
To provide for the study of derivatives regulation, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JUNE 16, 1998
Mr. LEACH introduced the following bill; which was referred to the Committee
on Banking and Financial Services, and in addition to the Committees
on Commerce, and Agriculture, for a period to be subsequently deter-
mined by the Speaker, in each case for consideration of such provisions
as fall within the jurisdiction of the committee concerned
A BILL
To provide for the study of derivatives regulation, and for
other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Financial Derivatives
Supervisory Improvement Act of 1998’’.
SEC. 2. FINDINGS.
The Congress finds as follows:
(1) There should be consistency, coordination,
and clarity in the regulation of derivative instru-
ments used by financial institutions.
(2) Banks and their affiliates developed, and re-
main the principal participants in, the derivatives
markets.
(3) Regulation of the derivatives markets di-
rectly affects the liquidity, efficiency, capital posi-
tion, and safety and soundness of the banking indus-
try and the safety and soundness of the Federal de-
posit insurance fund.
(4) Regulation of the derivatives markets has
profound consequences for the continued effective-
ness of the bank supervisory process, including the
capital provisions of the Federal banking agencies.
(5) Statutes and regulations governing use of
financial derivatives by depository institutions in the
United States, including over-the-counter and ex-
change-traded derivatives, should be brought up to
date to reflect the rapid evolution of the markets in
recent years, framed so as to keep pace with changes
in the markets brought on by the onrush of techno-
logical advances, and formulated in a manner that
enhances the legal certainty of derivatives trans-
actions.
(6) The Congress desires interagency coopera-
tion to harmonize, to the maximum extent possible,
United States rules and regulations related to the
derivatives markets.
(7) Regulatory arbitrage is a fact of commerce,
with market participants having the tendency to
move to the weakest regulator.
(8) The stability of the international financial
system and the competitive position of United States
financial institutions are jeopardized if foreign mar-
kets are regulated less prudently than United States
markets.
SEC. 3. ESTABLISHMENT OF WORKING GROUP ON FINAN-
CIAL DERIVATIVES.
(a) ESTABLISHMENT; COMPOSITION.—There is es-
tablished the Working Group on Financial Derivatives,
which shall consist of—
(1) the Secretary of the Treasury;
(2) the Chairman of the Board of Governors of
the Federal Reserve System;
(3) the Chairman of the Securities and Ex-
change Commission;
(4) the Chairman of the Commodity Futures
Trading Commission;
(5) the Comptroller of the Currency;
(6) the Director of the Office of Thrift Super-
vision;
(7) the Chairperson of the Board of Directors
of the Federal Deposit Insurance Corporation; and
(8) the President of the Federal Reserve Bank
of New York.
(b) CHAIRMANSHIP.—The Chairman of the Working
Group on Financial Derivatives shall be the Secretary of
the Treasury.
(c) DESIGNATION OF OFFICERS AND EMPLOYEES.—
The members of the Working Group on Financial Deriva-
tives may, from time to time, designate other officers or
employees of their respective agencies to assist in carrying
out the duties on the Working Group on Financial Deriva-
tives.
(d) ESTABLISHMENT OF ADVISORY COMMITTEES.—
In the development of recommendations related to deriva-
tive products, the Working Group on Financial Derivatives
shall consult, to the widest extent possible, with market
participants, and may establish advisory committees ac-
cordingly.
(e) SUNSET; REPORTS.—The Working Group on Fi-
nancial Derivatives shall cease to exist upon the enactment
of legislation authorizing appropriations for the Commod-
ity Futures Trading Commission for any fiscal year after
fiscal year 2000. The Secretary of the Treasury and the
Chairman of the Board of Governors of the Federal Re-
serve System shall submit to the Congress every 6 months,
during the 4-year period beginning on the date of such
cessation, a report on the progress of the implementation
of the recommendations of the Working Group on Finan-
cial Derivatives.
SEC. 4. STUDY AND RECOMMENDATIONS ON REGULATION
OF DERIVATIVES MARKETS.
(a) STUDY.—The Working Group on Financial De-
rivatives established under section 2—
(1) shall conduct a study on the regulation of
the derivatives markets, including over-the-counter
derivatives and exchange-traded derivatives, in which
depository institutions, brokers or dealers registered
under the Securities and Exchange Act of 1934, for-
eign banks, or affiliates of a depository institution or
a foreign bank, participate; and
(2) shall develop recommendations for mod-
ernizing and harmonizing statutes, regulations, and
policies—
(A) to reflect changes in the markets de-
scribed in paragraph (1);
(B) to improve their operations;