Surprise EU decision sees new rules for derivatives regulation
Published 05/10/2011 | 05:00
EUROPE's finance ministers yesterday sealed a surprise agreement on the regulation of complex derivative instruments after breaking a long-running impasse with the UK.
Polish finance minister Jacek Rostowski and Competition Commissioner Michel Barnier announced the "common position" to journalists last night.
The duo stressed that the agreement must still be approved by the European Parliament, but Mr Barnier said the new rules were "a key piece" of Europe's "architecture of financial regulation".
The new rules are designed to improve the transparency and security of the $600 trillion (€451tn) market for 'derivatives' or financial instruments whose value is ultimately based on the value of something else.
Under the plans, derivatives trades will now have to pass through 'clearing houses' or intermediaries that can absorb losses, and deals will also have to be registered in new data centres.
Crucially, the rules only cover derivatives that aren't traded on exchanges -- a point that the UK had bitterly disputed, since most of the City of London's derivates fall under the new rules while the Deutsche Borse's don't.
"We came here in a minority," the UK's chancellor of the exchequer George Osborne told journalists, "but through some hard negotiating, we very much improved the directive in the direction that the United Kingdom wanted to see."
Ireland had been supportive of the derivatives measures, which could have drawn regulatory scrutiny on Sean Quinn's disastrous €3bn punt on Anglo Irish Bank had they been in place at the time.
Finance Minister Michael Noonan was absent from the derivatives discussions yesterday, but sources stressed that the talks were "very technical" and that other Irish officials had attended.