15 July 2013

Commissioner Barnier: Interdependent swaps markets need interactive cross-border rules

Barnier began his remarks by describing how the European Union and the United States came to an agreement about how to regulate cross-border swaps at the G20 summit in Pittsburgh, Pennsylvania, three-and-a-half years ago. This “ambitious global regulatory reform of the swaps markets” set out to do three strategic tasks:

• Clearing: To reduce risk in our financial firms and system by clearing all standardised swaps through central counterparties.
• Transparency: To shed light on this opaque market and report all trades to trade repositories. We need to know where risk is building up in the system.
• Trading: Where appropriate, to move standardised swaps to venues to increase market transparency

Barnier compared uncoordinated cross-border regulations between the United States and the European Union to “squeezing a bar of soap with wet hands: it slips from your hands. Trades will be re-booked. Markets will fragment. The G20 reform objectives will not be met.” Barnier noted that 70 per cent of all global economic transactions take place between the United States and the European Union nations. For this reason, he argued that the United States and European Union need to “lead by example” by carrying out necessary economic reforms to meet G20 commitments “rigorously and sensibly".

Barnier described the trade negotiations between the European Union and the United States that began last week as focused on “growth and leadership”, which are imperative to cultivating new jobs in each sovereign nation, as well as finding solutions to trade predicaments that cannot be found through multilateral discussions. Barnier argued that the “barriers to EU-US trade and investment are in the details of regulatory policy”, and “regulatory barriers can block trade outright. Make it too expensive to be viable. Fragment global markets. Or just act as a drag on overall economic efficiency.” Mitigating these barriers through regulatory reform will effectively protect the European Union and the US economies from risks to their citizens and financial security.

To conclude his remarks, Barnier noted that the fundamental component of transatlantic trade reform is the joint leadership between the United States and the European Union. He believes “our financial sectors know no borders. They are intertwined and interdependent.” By reflecting on the agreement on swaps, Commissioner Barnier believes that the United States and European Union can create a dynamic bond that will “raise the bar in tomorrow’s world of financial regulation".

Full speech

Brookings Institute webpge with audio link

SIFMA released the following statement from former Senator Judd Gregg, CEO, and Kenneth E Bentsen, Jr, president, after EU Commissioner Michel Barnier called for financial services to be included in negotiations between the European Union and the US on the Transatlantic Trade and Investment Partnership (TTIP).

"The US and EU have the two largest and deepest capital markets in the world. Commissioner Barnier's comments this morning are welcomed and highlight the need for negotiators to put financial services issues on the table for discussion. TTIP provides the best opportunity to address existing and future regulatory issues by creating a process for discussing issues at an early stage, with mechanisms to help resolve, or at least mitigate, the impact of regulatory differences."

SIFMA-press release

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