European Swaps Regulation
The major institutions in charge of designing and implementing swaps regulation in Europe are the Financial Conduct Authority (FCA), International Organization of Securities Commissions (IOSCO), Futures and Options Association (FOA), the European Commission, and the European Securities and Markets Authority (ESMA).
Background on European Swaps Regulation
The financial crisis in 2008 exposed important shortcomings in financial supervision around the world. Because of this, the European Union began to examine their current financial regulatory systems, and decided that their current system of nationally-based supervisory models were insufficient in providing proper oversight. As of Jan. 1, 2011, the European Securities and Markets Authority was established in order to provide cooperation, coordination, and consistent application of regulatory oversight among European countries. It replaced the Committee of European Securities Regulators (CESR), which did not have the power to create broad regulations that covered all of the European Union member states. Financial regulation before ESMA was done on a national basis.
In March of 2010, some European leaders began pushing for a total ban on credit default swaps (financial instruments intended to provide risk insurance to banks and bondholders in case a particular bond or security goes into default). Credit default swaps (CDS) are accused of helping to aggravate the financial crisis in 2008, and have also been blamed for helping to cause Greece's sovereign debt crisis in 2010. European officials have said that they would move ahead with the ban with or without similar US action.
On June 29, 2011, German Chancellor Angela Merkel warned of another financial crisis and highlighted the need for transparency on credit default swaps (CDS) in Europe.