Brussels, 19/02/2009 (Agence Europe) - The International Swaps and Derivatives Association (ISDA), which represents the interests of the main players on the derivatives market, and the European Banking Federation (EBF) have given the European Commission written undertakings on setting up a central counterparty clearing house for the trading of credit default swaps (CDS) which are systemically relevant. “This commitment provides the basis for constructive dialogue with the European Commission, both on arrangements for central clearing and on related regulatory matters,” said ISDA Chairman Eraj Shirvani in a press release. Nine financial institutions signed the ISDA letter: Barclays, Citigroup, Crédit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley and UBS. “The objective of a European clearing is necessary and it will be pursued,” said EBF Secretary General Guido Ravoet. The organisation indicated that it had no preference for where this house/these houses should be located in Europe, provided it is/they are “safe, sound, efficient and reliable” and meet(s) users' requirements. The industry will have a meeting with the European Central Bank on Tuesday 24 February and with the European Commission in early March. This commitment comes after the undertaking given by the derivatives industry to US authorities.
Internal Market Commissioner Charlie McCreevy, on Thursday 19 February, welcomed this private sector initiative, following the failure of initial discussions on this issue at the end of 2008. “Central clearing of CDS is particularly urgent to restore market confidence. Given the size of derivatives markets, I am looking whether other measures might be necessary to make sure they are adequately supervised and do not pose unnecessary risks to financial markets,” he said. At the start of February, he invited the members of the EP economic and monetary affairs committee to set up a European clearing house for CDS by amending the directive on capital requirements for banks (see EUROPE 9833). This solution is certainly binding for credit derivatives market players, but slower to implement. Should the European Parliament maintain the pressure on the industry by brandishing the threat of regulation? The Commission is now tending towards abandoning the amendment suggested a few days earlier by McCreevy. The Commissioner's spokesman said that the private sector undertaking covered all the requests made by the Commission last autumn. Cautiously, he added that it was for the EP and the Council to see how they wanted to take things forward. The EBF is pressing MEPs not to amend the directive on capital requirements. (M.B./transl.rt)