European Swaps Regulation - Hearings & Testimony

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Hearings and testimony addressing European swaps regulation.

Michel Barnier - Press Conference - September 15, 2010

Video: European Commission Proposes Measures on Derivatives, Credit Default Swaps, and Short Selling to Restore Confidence in Financial Markets

At a press conference in Brussels on September 15, 2010, Michel Barnier, member of the European Commission in charge of Internal Market and Services, presented a proposal for a regulation aimed at bringing more safety and more transparency to the over-the-counter derivatives market.

As part of the European Commission's ongoing work in creating a sounder financial system, the Commissioner also tabled a proposal for a regulation on short selling and certain aspects of credit default swaps (CDS). Its main objectives are to create a harmonised framework for coordinated action at European level, increase transparency and reduce risks.

Some of Barnier's main points in the conference include:

  • The need to not just improve transparency in the derivatives market, but also the global management through standardization
  • The need to encourage centralized clearing of credit derivative swaps
  • The need to create a European approach to banning short selling on a temporary basis
  • The need to limit the risks of intensive speculation by forcing people and companies to be transparent

Michel Barnier - European Parliament Hearing - January 13, 2010

Video: Michel Barnier's January 13, 2010 European Parliament Hearing on the Need for Greater Regulation in the Financial Services Industry

Michel Barnier, the commissioner-designate for the Internal Market and Services, held a hearing for the European Parliment on Jan. 13, 2010. The main topics presented in his hearing were the need to give fresh impetus to the internal market and improve regulation of the financial services industry. MEPs from the economic affairs and internal market committees questioned him on the social dimension of the single market and his ideas for regulating Europe's financial sector in the long term.

Mindful of the French "No" to the draft Constitution in 2005, which he saw as "proof that Europe had strayed away from its citizens", Michel Barnier used his opening remarks to underline his intention of restoring public trust in the European project by "making sure the internal market is about those who live it on a daily basis: citizens, consumers and businesses". Replying to doubts about his impartiality in this area, Barnier said "I will take no orders from Paris, London or anywhere else".

Obeying the rules of the single market

To a question by Christian Buşoi (ALDE, RO) about the tools at his disposal to make Member States apply EU directives within the time limits laid down, Barnier said he favored negotiation rather than binding legal pressures. He planned to visit each of the 27 Member States to discuss with governments and economic and social representatives the slow implementation of the Services Directive. On this issue, Barnier admitted "I was not proud when the tale of the Polish plumber was bandied about in my country. It would be better in any case to speak of the Luxembourg plumber, who has to grapple with four different legal systems if he wants to work in a 40-kilometer radius".

Professional mobility and SMEs The right to live and work in another country is a key freedom that the Commission must defend, argued Mr Barnier. He said he intended to look closely at the problems encountered by Member States in transposing the directive on the mutual recognition of professional qualifications.

On small and medium-sized firms, which account for 80 percent of European businesses and 90 percent of jobs, the commissioner-designate planned to "make life easier for them", for example by introducing a European one-stop-shop to cut red tape and by completing legislation on the European company statute.

The social dimension In his opening remarks, Barnier had said that better living and working conditions and guaranteed access to high-quality public services would be among his priorities for relaunching the single market. "I will work to put the internal market at the service of human progress, fight social dumping and protect services of general interest", was his reply to a number of questions from MEPs, including Evelyne Gebhardt (S&D, FR), on the social dimension of the common market.

Europe's defense "Europe is not doomed to be a subcontractor of the American or Chinese economies. We will need a political Europe and a European defense dimension", said Barnier in answer to a question by Philippe Juvin (EPP, FR) about the fragmentation of the European market in military equipment.

"In an unstable, fragile and dangerous world, we must have a European defence dimension. But we will not advance against the Member States with threats to their sovereignty - we'll move forward with them", he said.

Financial market regulation and international markets Stressing his determination to reform the financial industry, Barnier said "There can be no consolidated European market without a European financial market". With a revision of the capital requirements directive, the creation of deposit guarantee schemes, the regulation of derivatives and measures on the traceability of financial products, he planned to "push through the reform of supervisory arrangements" needed to make Europe "the first region in the world to learn lessons from the crisis."

Peter Skinner (S&D, UK) asked Barnier how he would persuade the EU's international partners to adopt similar rules in the area of financial regulation, so that the world's financial centers had a level playing field.

"We are facing a global crisis", answered the Commissioner-designate. "We must start at home, in Europe, but we must also work with our partners round the world, especially the United States and China, to agree on a common frame of reference". He added "it is in our interest to be open but we must not be naïve".

Financial speculation and derivatives Jean-Paul Gauzès (EPP, FR) raised the question of speculation in commodities. "Speculation in basic foodstuffs is a scandal when there are a billion starving people in the world", replied Barnier. He added "We must ensure markets contribute to sustainable growth. I am fighting for a fairer world and I want Europe to take the lead on that".

Fears for the City of London In reply to sharp criticism from Godfrey Bloom (EFD, UK) about the consequences of regulation for the UK economy and London as a financial center in particular ("Don't kill the goose that lays the golden eggs", said Bloom), the Commissioner-designate answered "It isn't in the interests of the British financial industry to keep undergoing crises caused by a lack of control and supervision." Adam Smith, he pointed out, had said the market cannot function without a sense of fair play.

September 25, 2009 Conference: Derivatives in Crisis – Safeguarding Financial Stability

Video:

On 3 July 2009, the European Commission adopted a Communication on ensuring efficient, safe and sound derivatives markets. The Communication looks at the role played by derivatives in the financial crisis and at the benefits and risks of derivatives markets, and assesses how risks can be reduced. It is accompanied by a Staff Working Paper, which contains an overview of 1.) derivatives markets, 2.) OTC derivative market segments, and 3.) an assessment of the effectiveness of current measures to reduce risks, notably as regards CDS. It is further accompanied by a Consultation Paper, which asks stakeholders and public authorities for their opinion on the policy tools presented in the Communication. The consultation period ended on 31 August 2009. The purpose of this conference is to conclude the consultation.

Keynote Speeches

  • David Wright (Deputy Director General, European Commission, DG MARKT)
  • Gary Gensler (Chairman, U.S. Commodity Futures Trading Commission)

The Economists' View

  • Chair: Mario Nava (European Commission, DG MARKT)
  • Viral Acharya (Professor, New York University, Stern School of Business)
  • Nadège Jassaud (Banque de France, Chairwoman ESCB Task Force CDS)
  • Jan Pieter Krahnen (Professor, University of Frankfurt, Center for Financial Studies)
  • Jean-Pierre Zigrand (Professor, London School of Economics)

Regulators and Industry

Panel 1: Derivatives in general

  • Chair: Alberto Giovannini (Chairman, Unifortune)
  • Gary Gensler (Chairman, CFTC)
  • Guido Ravoet (Chairman, European Banking Federation)
  • Daniela Russo (Director General Payments and Market Infrastructure, European
  • Central Bank)
  • Pablo Salame (Co-Head Trading and Sales, Goldman Sachs)

Panel 2: Credit Default Swaps

  • Chair: Gillian Tett (Capital Markets Editor, Financial Times)
  • Athanassios Diplas (Counterparty Portfolio Management, Deutsche Bank)
  • Theo Lubke (Head Financial Infrastructure, Federal Reserve Bank of New York)
  • Blythe Master (Head of Global Commodities, JP Morgan Chase)
  • Eddy Wymeersch (Chairman, Committee of European Securities Regulators)

References

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