Brussels, 09/03/2011 (Agence Europe) - France opposes the idea of allowing pension funds to be exempt from the payment rules for standardised derivatives and wants monitoring of central clearing houses for derivatives (CCPs) to be as European as possible. The ideas are set out in an unofficial document France describes as a “non-paper” (circulated among MEPs) that this newspaper has seen.
Paris sets out serious risks if pension funds were to be made exempt from the payment rule for derivatives. The French government says that by making such a move, the EU would be taking a different line from US lawgivers and would endanger the promises made at the G20. The French government points out that the Franck Dodd Act explicitly stipulates that private funds are viewed as financial bodies and subject to the normal payment rules. Moreover, an exemption at EU level would create a major regulatory difference and could lead to derivative deals being shifted from elsewhere in the world to Europe, focusing the risk of system collapse in Europe. Such an exemption could also encourage other financial bodies to set themselves up as pension funds to benefit from the exception, argues Paris.
France also warns against further flexibility on the type of collateral that financial players must provide as a guarantee in their dealings with clearing houses. Agreeing to accept shares as collateral would introduce a huge liquidity risk because shares have to be sold on the markets whereas cash is immediately available, it explains.
ESMA. The central clearing houses (CCPs) are key to the economy and operate across borders. If they get into financial problems, they could impact on the stability of member states and the French government wants the European Securities and Markets Authority (ESMA) to be given a greater role in the supervision of CCPs, particularly with regard to the colleges of supervisors responsible for controlling the CCP. France says that ESMA should have the power to validate CCP authorisations issued by the supervisor of the country where the CCP is registered.
On the payment obligation, the French delegation believes that ESMA should have the power to decide on payment duties in line with detailed, operational criteria and should also decide when such a duty applies. The idea is to avoid special categories of derivatives, like the foreign exchange derivatives (FOREX) being exempt from the payment duty. France argues that ESMA should have the option of requiring industry to develop special payment systems for derivatives. (M.B./transl.fl)