Bloomberg News

EU Lawmakers May Urge Veto of Swaps Rules on Business Concerns

January 30, 2013

European Union lawmakers may oppose draft rules for over-the-counter derivatives amid concerns that the measures would be too onerous for businesses and don’t respect existing EU law.

The European Parliament’s economic and monetary affairs committee may vote against the measures at a meeting on Feb. 4, according to documents on the assembly’s website.

Lawmakers are concerned the rules may force non-financial companies to begin passing their trades through clearinghouses even when the values of such transactions are “considerably below systemic relevance.”

Global regulators are seeking to toughen rules for the $639 trillion market for OTC derivatives, which became a target for oversight after the 2008 collapse of Lehman Brothers Holdings Inc., and the rescue of American International Group Inc. (AIG:US), two of the largest traders in credit default swaps.

The EU rules under review may also make it harder for businesses to work with clearinghouses, by restricting companies’ ability to use bank guarantees as collateral to back up their trades, according to the Parliament documents.

The so-called technical measures were drafted by the European Commission and flesh out legislation from 2012 aimed at regulating the OTC derivatives market.

Should the committee oppose the rules, the dossier would then be sent to the full assembly for further review. If it rejects the draft standards, they couldn’t enter into force.

The commission, with input from the European Securities and Markets Authority, would then need to re-adopt a version of the measures for review by lawmakers and national governments.

Clearinghouses such as LCH.Clearnet Group Ltd. and Deutsche Boerse AG’s Eurex Clearing operate as central counterparties for every buy and sell order executed by their members, who post collateral, reducing the threat from a trader’s default.

Stefaan De Rynck, a spokesman for the Brussels-based commission, declined to comment.

To contact the reporter on this story: Jim Brunsden in Brussels at jbrunsden@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net


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