Following the collapse of Lehmans and AIG in 2008 the regulatory authorities in both the US and Europe were concerned about the systemic risks arising from the build up of positions in OTC derivatives. They were worried that the huge volumes of outstandings and the lack of transparency could mean that in the event of the collapse of a large market participant there could be a catastrophic chain of defaults and the withdrawal of liquidity from the markets. After much public and private debate during 2009 and 2010 the US has enacted new law in the shape of the Dodd-Frank Wall Street Reform and Consumer Protection Act, while in Europe the European Commission has drafted a proposed Regulation which was adopted on 15th September 2010 Corporate treasurers were concerned that an obligation to put up cash margin as collateral might inhibit companies from using tailored OTC derivatives, including many straightforward transactions such as FX forwards, currency and interest rate swaps, options and commodity forwards. In the event there are exemptions for non financial companies in both the US law and EU proposals, but the thresholds below which the exemptions apply have not yet been set. Since 2009 companies, the EACT and the ACT have been campaigning to ensure the various regulations are not harmful to companies. The strength of feeling amongst non-financial companies and the importance they attached to this issue was demonstrated by a letter from the EACT to the European Commissioners (dated 6 January 2010) and which was signed by over 160 companies from across Europe. A summary position paper, prepared with the European Association of Corporate Treasurers, sets out the original concerns on the proposed European initiatives concisely. On 20 October 2009 the EU commission published its revised proposals which did recognise that the use of derivatives by non-financial companies does not create a systemic risk and therefore went some way in reducing the negative implications for companies from the proposals. In its Press Release responding to the announcement the ACT welcomed this step but warned that dangers still remained.
In response to the US and EU proposals for regulatory reform of the OTC derivatives the ACT has made submissions: