WASHINGTON, D.C. – U.S. Representative Zach Nunn (IA-03) and U. S. Senator Jerry Moran (KS) led their colleagues in cautioning federal regulators on the harmful impact proposed Basel III Endgame regulations would have on agriculture and energy industries.
“We have concerns that the GSIB Surcharge Proposal and the Basel III Endgame Proposal will generate disincentives for prudent risk management strategies and drive up the cost of hedging for end-users,” the members wrote. “Ultimately, consumers who are already facing elevated prices from record levels of inflation will pay the price at the grocery store and the gas station.”
“When farmers, ranchers, or other end users enter into futures or other centrally-cleared derivatives contracts to mitigate the risk they face from fluctuating commodity prices, they generally initiate the trade through a Futures Commission Merchant (FCM) registered with the CFTC,” the members continued. “FCMs provide market access to their clients through memberships at regulated derivatives exchanges and clearinghouses, and the vast majority of FCMs today are banks that will be subject to the proposals. Increasing regulatory capital charges for banks that provide end-users with access to these hedging markets and risk management tools is a misguided approach.”
This effort is supported by the American Farm Bureau Federation, National Milk Producers Federation, Louis Dreyfus Company, Commodity Markets Council, American Cotton Shippers Association, Futures Industry Association, International Swap Dealers Association, National Grain and Feed Association and National Futures Association.
The full letter can be found here.