Rapporteur Werner Langen (EPP, DE) said that CFTC Chairman, Gary Gensler, had informed the ECON committee that the US Congress has postponed the adoption of the part of the Dodd-Frank Act related to OTC derivatives.
Langen stressed that it is important to take into account the new timing in the US. Langen also mentioned that the committee should carefully consider which types of derivatives are beneficial and which are “too risky.” He announced that he will start meeting the shadows rapporteurs right after Easter in order to negotiate the compromise amendments.
Shadow Rapporteur, Kay Swinburne (ECR, UK), stressed that there is consensus on many issues among the MEPs. On the exemption for non-financial corporates she said that hedging criteria should be defined in Level 1 in order to grant legal certainty for end users. She called on the committee to consider seriously her amendment number 488 which deals with this issues. Swinburne also mentioned that special treatment should be granted to FX because this class of derivatives does not pose any risk to the system.
Shadow Rapporteur, Jürgen Klute (GUE, DE), highlighted that the number of exemptions should be limited. He believes that the FX derivatives should not be exempted because they represent a high volume of the total derivatives trade. Concerning the exemption for pension funds he said that they should not be exempted as they represent some of the biggest actors in the financial market.
On behalf of shadow rapporteur, Pascal Canfin (Greens, FR), Sven Giegold (Greens, DE) said that the clearing obligation should be extended to as many classes of derivatives as possible. Concerning the hedging criteria for non-financials, he said that regulators should just consider IFRS 39.
Shadow rapporteur, Sharon Bowles (ALDE, UK), highlighted that the US accepts a greater range of collaterals than the EU and that this could pose many problems to pension funds. She called on the Commission to analyse carefully the case of pension funds and the “expensive collaterals” that the EU legislation will impose on them. On intra-group transaction she said that a robust arrangement should be achieved, and that the Conglomerates Directive could provide some input to the debate.
Werner Langen concluded that Swinburne’s Amendment 488 provides detailed criteria for hedging in Level 1. The right balance between Level 1 and Level 2 on EMIR should be achieved and he mentioned the FSB progress report on OTC derivatives markets. The ECB has submitted further proposal to Langen on certain aspects of the supervision of the OTC derivatives market which will be taken into account by Langen when negotiating the compromises. Langen said that pension funds do not speculate but use hedging to secure their tradings and at the moment he does not have a solution for this issue. Concerning commodities trading, Langen said that the EC will tackle this issue on a separate piece of legislation, and that a recital in EMIR could be introduced.
Next steps:
ECON committee vote: 24 May 2011
Plenary vote: Still open
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