Regulators hammer out transatlantic deal on supervision

City A.M. Reporter
WATCHDOGS from both sides of the Atlantic yesterday agreed to work more closely to supervise credit rating agencies, hedge fund advisers and clearing of off-exchange traded derivatives.

An agreement signed in 2006 to swap information will be expanded, the US Securities and Exchange Commission and the Financial Services Authority (FSA) said in a statement.

“Our ongoing dialogue gives us the opportunity to widen the areas of cooperation between the FSA and the SEC, in particular progressing our collaborative work on hedge funds and credit rating agencies,” said FSA chief executive Hector Sants.

Since the original agreement was signed, the financial system has suffered its worst crisis since the 1930s, highlighting costly lessons about supervisory failures.

World leaders have agreed that many off-exchange derivatives trades should be centrally cleared to cut risk but the move raises tricky cross-border issues such as where global banks should report transactions.

Closer cooperation will enable both watchdogs to develop better regulatory systems that take into account the national and international nature of markets, SEC chairman Mary Schapiro said.

Yesterday’s meeting between the pair also explored bank pay and cooperation in supervising corporate governance and risk monitoring at firms.

The regulation of hedge funds and investment advisers and the protection of customer assets was also touched on.