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March 4, 2020

RELEASE: The CFTC Must Re-propose Its Capital Framework Once it Has Implemented Financial Reporting, to Ensure the Safety and Soundness of Swap Dealers

Wednesday, March 4, 2020
Contact:  202-618-6433,

Washington, D.C.  –  Joseph Cisewski, Senior Derivatives Consultant and Special Counsel at Better Markets, issued the following statement regarding the Commodity Futures Trading Commission’s (CFTC) proposed reconsideration of 2016 capital regulations applicable to certain swap dealers (SDs) and others:

“SD capital requirements are among the most consequential derivatives reforms in the Dodd-Frank Act.  They have a direct impact on the safety and soundness of SDs and the U.S. financial system, determining the extent to which SDs can weather the next economic downturn and remain resilient enough to prevent losses from spreading to other financial institutions and the U.S. financial system.

“Yet, almost 12 years after the financial crisis (2008), 10 years after Congress’ adoption of the Dodd-Frank Act’s capital mandate (2010), 9 years since publication of the CFTC’s initial capital proposal (2011), and 7 years since most SDs provisionally registered (2013), the CFTC neither has implemented its statutory capital responsibilities nor required capital-related financial reporting necessary to assess the actual application and effect of its proposed capital regulations.

“That is unacceptable.  The importance of capital requirements can hardly be overstated.  In the lead-up to the 2008 financial crisis, U.S. regulators permitted banks and less regulated financial institutions to remain dramatically undercapitalized and to structure legal entities and/or activities to avoid capital requirements.  That regulatory failure contributed to the financial failure and near-failure of nearly every major investment bank and numerous systemically important banks. 

“The result was trillions of dollars of U.S. taxpayer bailouts, loans, and emergency programs, which were essentially extorted from policymakers to prevent the Wall Street induced meltdown of the U.S. financial system.  And while Wall Street received a bailout, much of Main Street did not.  Wall Street’s negligence and worse caused untold personal, financial, and professional misery on working Americans for years. 

“Adequate capital requirements on the largest derivatives dealers, in particular, would have done much to prevent the 2008 financial crisis from developing as it did.  They would have, at the very least, ameliorated the contagion and panic that ensued in the darkest months of 2008.

“That is why the CFTC must implement SD capital requirements that actually—and not just apparently—increase safety and soundness, mitigate systemic risks, and serve the other public interest objectives.  The CFTC must not give the public false confidence in the safety and soundness of SDs and the U.S. financial system by cutting procedural corners and rushing to judgement after a decade of delay.

“The best way for the CFTC to provide the public legitimate confidence is to implement financial reporting that provides the CFTC reliable information to determine the actual level of quality capital SDs would have available to absorb losses in an economic downturn (see our comment letter).  Any conceptual capital framework adopted without that information—however elegant in theory—would amount to little more than a guess as to what might be adequate, which is not just unlawful but irresponsible.”


Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit

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