By Richard Keller, AgProfessional editor
The agricultural industry implications of the newly passed Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly referred to as the financial reform act, is unknown and too early to be fully quantified.
The politically charged discussions from congress are the main words being spread. In general, reporters are having trouble uncovering all the possible implications, and the sound bites from politicians have not provided extensive insight to specific wording or sections of the bill that will definitely cause hardship or improve agricultural business, banking or commodity marketing.
The scope of the whole financial situation was well noted by the Risk Management Association President and CEO Bill Githens. "The passage of the Senate reform bill marks an historic change in regulation of the financial services industry. While broad in scope at more than 2,300 pages, the legislation leaves many details to be filled in by the regulatory agencies. It calls for 243 rulemakings, 67 studies and 22 new periodic reports. The effects of the legislation will be unknown for many months, if not years."
A couple general points are known. The requirement that derivatives be handled separate from the rest of a financial institution has some financial managers concerned about managing costs and increased costs related to derivatives.
There was no weakening or altering in any great way of the Commodity Futures Trading Commission. It wasn't melted into the Security Exchange Commission or with some other regulatory body, which had been a concern by many in ag months ago. Commodity contracting by farmers and ranchers will not be impacted, it has been noted.
Swaps that were extensively discussed for use by ag retailers for guaranteeing fertilizer pricing and supply are anticipated to be regulated more and differently, according to some sources.
Information will be surfacing, and the Food 360 Group and Doane's Advisory Services of Vance Publishing will be investigating, interpreting and reporting.
Many groups including the Risk Management Association have reported that they will be working with the industry and regulators to get through what won't be an easy period. RMA will be a "liaison to help all parties understand the ramifications of proposed rules so that unintended consequences can be avoided and appropriate risk management practices are adopted," Githens said.
RMA promotes itself as a not-for-profit, member-driven professional association whose sole purpose is to advance the use of sound risk principles in the financial services industry. RMA has 3,000 institutional members and 18,000 risk management professions that work for banks of all sizes as well as non-bank financial institutions.