US may soon regulate foreign finance: report

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US authorities may soon seek to regulate foreign entities engaged in financial activities in the country as part of efforts to reduce risk to the economy, the Wall Street Journal has reported.

The Journal said that authorities may soon subject foreign central banks, sovereign-wealth funds and international organizations like the World Bank to new US rules governing derivatives.

It said the European Central Bank, Banque de France and China's sovereign-wealth fund, China Investment Corp., have all warned the US Securities and Exchange Commission (SEC) against applying the rules to them.

The regulations stem from the 2010 financial overhaul approved in the wake of the economic crisis, which allows authorities to regulate swaps, a type of derivative pegged to the performance of stocks, bonds, commodities or indexes.

Among other things, the new regulations, if applied, would require foreign entities to have enough cash on hand to cover potential losses from the swaps.

The US Federal Reserve, however, remains exempt from the rules.

The Journal cited government officials as saying that the Commodity Futures Trading Commission (CFTC) and the SEC, which are writing the swaps rules, have sought guidance from the Federal Reserve on the issue.

It said regulators could exclude some entities depending on how well-regulated and well-capitalized they are.

© 2011 AFP

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