JPMorgan Chase and other US banks have given more importance to their own interests than their clients in a fight over tough Basel bank capital rules for derivatives sold privately off exchanges, allege leading European firms.
The European Association of Corporate Treasurers, which represents 6,500 companies, has convinced the European Union to ease the Basel III rules by exempting over-the-counter (OTC) derivatives sold to corporates from an onerous capital charge.
The EU move means banks based there will be able to charge much less for their OTC derivatives than banks elsewhere, reported the Financial Times. The news sparked complaints of an unlevel playing field from US competitors and their trade group Securities Industry and Financial Markets Association (Sifma).
In March, Richard Raeburn, Chairman of the European Association of Corporate Treasurers (EACT), wrote to JPMorgan complaining about efforts by US banks to lobby their regulators and the Basel Committee on Banking Supervision on the issue.
In the letter seen by the Financial Times, Raeburn said the complaints about the EU exemption raised questions about “JPMorgan’s concern for its corporate customers globally”.
“This would not be the first time that the impression is given by investment banks that in determining their policy positions the interests of those customers do not have the priority we feel is merited,” Raeburn wrote.
Raeburn, in an interview, said that the treasurers were also upset by a public letter Sifma sent to US Treasury Secretary Jacob Lew urging him to tell EU officials “this difference in regulatory treatment runs counter to the Financial Stability Board’s and G20’s stated objectives of promoting internationally co-ordinated and consistent implementation of its regulatory action plan”.
JPMorgan, however, highlighted that it is not seeking the cancellation of the EU exemption. Rather, it wanted a global reduction in the charges, known as CVA.
Daniel Pinto, co-head of JPM’s corporate & investment bank, wrote: “We have drawn attention to the inconsistency in the hope that regulators will seek to modify the methodology and calibration of the CVA charge. We always have our client’s best interests at heart. We need a regulatory regime that allows us to compete fairly and to serve them the best way possible.”
Ken Bentsen, acting CEO of Sifma, said: “Basel needs to fix CVA. We don’t think it is appropriate to have different interpretations in different jurisdictions.”
Raeburn said: “We felt that it was essential to bring this issue out into the open. The banks’ customers can draw their own conclusions.”