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30 June 2009

McCreevy sends a warning to OTC derivatives market industry


The Commission closely monitors industries commitment to clear CDS' on one or more European CCP's. “If industry is unable to deliver, we have to consider other ways to incentivise the use of CCP clearing for credit default swaps”, he warned.

The Commission is closely monitoring the commitment of the OTC derivatives markets' industry to clear credit default swaps on one or more European central counterparties by the 31st of July, Commissioner McCreevy underlined and announced to publish the Commission findings on the functioning of the OTC derivatives market in due course.

“If industry is unable to deliver on this commitment, we shall have to consider other ways to incentivise the use of CCP clearing for credit default swaps”, he warned.
 
“We explore possible ways to reduce the impact of OTC derivatives markets on financial stability through increased transparency and improved counterparty risk mitigation”, he said announcing a consultation after the summer at the latest.
 
In parallel to the reinforcement of the European supervisory architecture Commissioner McCreevy pointed out that Banks will have to pay more attention to the loans they generate for onward securitisation. In particular, he wants to address the shortcomings of the capital requirements for the trading book. “And our message is simple: if you want to hold a position on your trading you will need capital to back it”, he said.
 
Later this year there will be further measures to help constrain the build-up of leverage in the banking sector, he announced.
 
 


© European Commission


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