Plenary session: EP votes to ban credit default swaps

16 November 2011

Rapporteur Pascal Canfin stressed that the approved regulation will define for the first time a European regime for short selling and CDS which has been proven to be highly needed during the current sovereign debt crisis. The regulation will enter into force in November 2012.

Rapporteur Pascal Canfin (FR, Greens) presented the following two main compromises reached during the trialogue negotiations:

• Leave a margin of movement for proxy hedging. This in practice will mean that if the investor doesn’t have sovereign debt but he has a correlated investment to the sovereign debt, then he will be able to hold CDS on the debt.
• The possibility of an opt out. This will mean that Member States will be able to decide if they want to introduce the ban on sovereign debt on their own debt. If a Member State wants to opt out, it will have to inform and justify to ESMA the reasons for such a decision. Italy and Spain have been involved in this issue.

Sharon Bowles (UK, ALDE) stressed that the EU institutions have reached a reasonable compromise on the proposal. The majority of the committee supported the compromise. When asked about the possibility of the UK filing a legal complaint to this regulation, Sharon Bowles said that there is always a possibility to challenge a legislative initiative if a Member State thinks that there is something that should be improved. She stressed that maybe the approved EU rules are different from the ones in London, however, Bowles said that this is workable legislation for the UK.

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