EU, U.S. Reach Deal on Derivatives Oversight
February 10 2016 - 10:40AM
Dow Jones News
BRUSSELS—Regulators in Washington and Brussels have struck a
deal advancing a central component of post-financial-crisis efforts
to coordinate on international rules for derivatives, which played
a central role in the 2008 meltdown.
The deal between the Commodity Futures Trading Commission and
the European Commission, the European Union's executive arm,
revolves around the regulation of clearinghouses—entities that are
supposed to help prevent a marketwide collapse by ensuring either
party in a derivatives transaction would get paid if the other side
falters.
Under the agreement, announced early Wednesday, European policy
makers will agree to bless U.S. clearing regulations as
"equivalent" to their own, ending an impasse that had lasted at
least two years and complicated efforts to establish a system of
oversight for the multi-trillion-dollar derivatives market that is
"largely equivalent" across borders.
"This is an important step forward for global regulatory
convergence," said Jonathan Hill, the EU's financial-services
chief.
Mr. Hill said the deal means European central counterparty
clearinghouses, or CCPs, will be able to do business in the U.S.
more easily and that U.S. CCPs can continue to provide services to
EU companies.
The deal is a win for U.S. entities like CME Group Inc. and
Intercontinental Exchange Inc. Without the "equivalence" blessing,
European banks that choose to clear their trades in the U.S. would
have faced steep capital charges, which industry officials said
would have been unduly costly.
Derivatives, including swaps, are used by firms to hedge or
speculate on everything from moves in interest rates to the cost of
fuel.
"Our agreement is critical to ensuring that our global
derivatives markets remain robust, while keeping our financial
system as stable and resilient as possible," said CFTC Chairman
Timothy Massad.
Write to Viktoria Dendrinou at viktoria.dendrinou@wsj.com and
Andrew Ackerman at andrew.ackerman@wsj.com
(END) Dow Jones Newswires
February 10, 2016 10:25 ET (15:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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