Treasury Secretary Timothy Geithner called for Congress to regulate all over-the-counter derivatives before a House hearing Friday.

“Our proposals have been carefully designed to provide a comprehensive approach,” Geithner said. “The plan will provide for strong regulation and transparency for all OTC derivatives, regardless of the reference asset, and regardless of whether the derivative is customized or standardized.”

As proposed last month by the Treasury Department, Geithner recommended that only standardized derivatives contracts be cleared -- and only through well-regulated central counterparties -- and executed either on regulated exchanges or regulated electronic trade execution systems, according to his testimony.  But Geithner’s definition of standardized derivatives could eventually include nearly any derivatives contract.

“We will propose a broad definition of standardized OTC derivatives that will be capable of evolving with the markets and will be designed to be difficult to evade,” he said.

Geithner also endorsed conservative capital and margin requirements for dealers. 

“Our plan will provide for strong supervision and regulation of all OTC derivative dealers and all other major participants in the OTC derivative markets,” he said.

Geithner outlined requirements for the Securities and Exchange Commission and the Commodity Futures Trading Commission to impose record-keeping and reporting requirements on derivatives.

“We have been working with the SEC and the CFTC over the past few months to develop a sensible allocation of duties,” he said.  “We have made great progress in narrowing the outstanding issues, and intend to send up draft legislation that will provide for a clear allocation of oversight authority between the SEC and CFTC.”

Making a small mention of credit-rating companies, Geithner said the SEC is drafting new rules to govern them.