Dodd-Frank: Who'll Pay for New Regs?

Thomas P. Gibbons, vice chairman and CFO of BNY Mellon, says he understands the need for regulators to get the 243 rules, to be written under the Dodd-Frank Act, right the first time around. But he is also hoping that these regulators get moving.

"We'd love to [spend the time to] get it right, but we'd also love to get rid of the uncertainty," he said at a panel discussion at the Dodd-Frank Impact Analysis summit, held in New York. "Obviously we need good accounting standards and we need good capital standards, but we're trying to do an awful lot in a short time."

Indeed, uncertainty is probably the only Dodd-Frank impact of which financial executives may to be certain, as regulators thrash out the particulars of everything from centralized clearing for swaps and other derivatives, margin requirements for financial and non-financial hedgers and enhanced capital requirements.

"We won't really know the effect of all this stuff until after we do it," said Deutsche Bank Americas deputy CEO Donna Milford. "I think it's fair to say that everyone is going to be impacted," she said, adding that while all of her company's customers are going to take compliance cost hits, the biggest "real issue" is going to be experienced by clients involved in financial hedging, who will have higher margin requirements.

As definitions emerge for different types of hedgers under Dodd-Frank, companies are anxiously awaiting word on where their hedging activities fall. While the distinction between commercial hedging -- as in the case of an airline protecting itself against jet-fuel price fluctuations -- and more-speculation-based financial hedges may seem obvious, the new Dodd-Frank rules may, in effect, require major payers to segregate their balance sheets based on the purpose of each transaction.