Bank and Fed clash over rules on derivatives
THE Bank of England and the US Federal Reserve fell out yesterday over whether the derivatives-trading subsidiaries of large US securities firms should be regulated, writes Peter Rodgers.
Brian Quinn, a Bank director, said he supported calls by the General Accounting Office, an arm of Congress, for this to be done.
But Alan Greenspan, chairman of the Federal Reserve, appeared to rule out such measures when he said there was a negligible risk that a taxpayer bail-out would be necessary for a brokerage firm that had run into problems from dealing in derivatives.
He also told a House hearing the chances of serious systemic problems arising from derivatives were remote and needed no legislation.
Mr Quinn, speaking at a London conference, backed the GAO recommendation on securities subsidiaries, but said he did not accept that supervision should extend beyond the trading subsidiaries of securities firms to their customers or to other dealers.
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