First CCP equivalencies- US still barred from the club
The EC yesterday adopted its first equivalence decisions for the jurisdictions of CCPs in: Australia, Hong Kong, Singapore and Japan. CCPs in these countries will now be able to achieve full recognition by the EU, retaining their qualifying status for reduced capital charges past the 15 December 2014 deadline. Congratulations are due to those countries’ CCPs who may remain open to business from EU members, however the adoption serves to underline the glaring absence of the US from the list.
Michel Barnier, in one of his last pre-retirement utterances, said “Globally agreed reforms of derivatives markets – like all financial services reforms – will only work in international markets if regulators and supervisors rely on each other. Today’s decisions show that the EU is willing to defer to the regulatory frameworks of third countries, if they meet the same objectives as EU rules. We have been working in parallel on assessing twelve additional jurisdictions and finalising those assessments is a top priority. This includes the United States: we are in close and continued dialogue with our colleagues at both the SEC and CFTC as we develop our assessments of their respective regimes and discuss their approaches to deference.”
In light of the continuing stalemate between the EU and the US, the above might be better read as “the EU is willing to accept the deference of other countries as expressed by the similarity of their rules to ours”. The EU objectives are simple- the third country must contain a robust CCP framework that promotes financial stability through a reduction in systemic risk. The continued, even if only implicit, threat to exclude the US in the face of the fast-approaching deadline, seems at best reckless intransigence and is at worst the visible tip of a trade war iceberg.