21 June 2012

Commissioner Barnier: The US must not override EU regulators

Over the past two years, many countries have made huge strides to regulate the opaque, $700 trillion “over the counter” derivatives market. Across the G20, regulations are or will soon be in place that will bring greater transparency and increase safety by requiring clearing, trading and reporting of the OTC market.

But our efforts will be in vain if we fail to realise that a global market can be regulated only by national rules that work together, closing gaps and avoiding overlaps. Fortunately, the US with the Dodd-Frank Act and the EU through its “EMIR” derivatives regulation have laws in place to make this possible. The real danger we now face is that the national regulators who have been entrusted with interpreting and applying these laws may thwart our efforts.

US regulators are seriously considering a wide interpretation of who a “US person” is under the Dodd-Frank Act. The danger is that many of the requirements would apply to companies in the EU and to trades between the EU and US clients. American rules would take primacy over those in Europe.

The US has shown initiative in developing rules for the derivatives market. I now call on US authorities to show leadership in applying them fairly. They must be prepared to rely on equivalent rules in host countries.

A narrow definition of what a “US person” is under the Dodd-Frank Act is the first place to start. If not, it will be difficult for the EU to accept US rules as equivalent to ours. Supervision of global markets will fail if regulators cannot work in harmony, particularly across the Atlantic. We will insist that the interests of the City of London and other European financial centres are respected. Above all, investors, savers – in short, all our citizens – expect us to have understood the lessons of the recent past and enforce rules that apply seamlessly in the world’s main financial centres.

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