More regulatory oversight expected, especially for CDS, but shape remains unclear, LSTA panel says

By Andrea Heisinger

New York, Oct. 23 - A panel of public officials looked into their crystal balls to talk about the future of financial regulation at Thursday's Loan Syndications & Trading Association conference - and generally agreed that there will be more of it, even if the exact form it will take is currently unclear.

Citing the recent and future talks among world leaders about global markets, Brandon Becker of WilmerHale LLP, said it was a new path being blazed.

"When you start getting to presidents and prime ministers, you have a much broader conversation about regulations and oversight," he said as moderator of the panel. "We need some global lender-of-last-resort oversight."

It's unclear whether this increased oversight will come out of the Federal Reserve or whether Congress will form a new agency to deal with it, he added.

Among the things perhaps needing more attention are credit-default swaps, Becker said, adding that they are "in the bulls-eye for reform."

Nearly everyone on the panel agreed there would be much more regulation introduced, but that it's unclear when or where it will happen.

Good coordination is key, a panelist said, adding that any financial institution large enough to potentially affect the system broadly needs some sort of oversight.

Dan Gallagher of the Securities and Exchange Commission said many changes apply to Goldman Sachs and Morgan Stanley with their transformation to bank holding companies, and that it has yet to play out but likely will over the next three months.

He added that there will be regulatory changes, and they will be quick.

"There's been a lot of scrutiny of the commission's programs lately," Gallagher said. "We've learned where the statutory schemes are redundant and where there are gaps. The CDS operates where there's a loophole or gap. There needs to be statutory fixes."

Panelists also said that recent scrutiny of ratings agencies is warranted, but that banks and others shouldn't depend on oversight of these agencies and should practice their own due diligence.

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