The Treasury Department is monitoring Wall Street efforts to escape U.S. swap-trading restrictions for overseas derivatives, according to a department official.

Treasury is watching steps banks have taken to remove parent-company guarantees from their overseas affiliates and whether those steps eliminate the U.S. banks' exposure, the official said yesterday. Banks have been changing operations to trade derivatives with other dealers in the $700 trillion global market in a way that avoids curbs imposed by the Dodd-Frank Act.

Treasury joins the Commodity Futures Trading Commission (CFTC) and the Federal Deposit Insurance Corp. in reviewing the practice. The Dodd-Frank restrictions were intended to reduce risk and boost transparency in the market by having most swaps guaranteed at clearinghouses and traded on exchanges or swap-execution facilities.