The European Union’s financial services chief, Michel Barnier, issued a letter asking EU Lawmakers to drop a threat that would block derivatives rules, stating the plan has the potential to harm the EU credibility.
According to Barnier’s letter, obtained by Bloomberg News, delaying over-the counter derivatives trades, “would have serious implications on our credibility vis-a-vis our international partners, at a time when key discussions on the cross-border application of rules on OTC derivatives are taking place.”
Global regulators are fortifying the rules and procedures for the trillion-dollar market for OTC derivatives, which became a target for oversight in 2008. In 2009, the Group of 20 nations agreed to industry standard types of OTC trades should be sent through clearinghouses and logged in repositories.
European Parliament members have threatened to reject two technical standards proposed by Barnier’s aides, citing overall legislation concern for non-financial businesses. The rules may force these companies to begin passing their trades through clearinghouses, even if the value of these transactions are below systemic relevance.
Delaying the adoption of these rules, according to Barnier’s letter, “risks creating a competitive disadvantage for EU firms.” If the committee opposes the rules, the documents would then be sent to the full assembly for further review. If rejected, they are unable to enter into force, requiring input from the European Securities and Markets Authority.