Dodd-Frank 30 Day Countdown: Day 7

Britain and EU Differ over Derivatives Reform Rules

Last Monday, July 4, the EU announced that it won’t be prepared to make any decisions regarding derivatives regulation before September.

The European Market Infrastructure Regulation (EMIR) has hit a road block as a result of the inability of the European states to reach compromise on which types of derivatives should be cleared. The U.K. is in favor of a law requiring that all derivatives be cleared to mirror the requirements imposed by Dodd-Frank, while other EU states, and specifically the EU Parliament, have opined that legislation should only include off-exchange derivatives.

In addition, the Alternative Investment Management Association (AIMA) has warned that the current draft of the EMIR legislation will create barriers to business such as “excluding EU-established financial service providers from using central counterparties which are not located In the EU.”

Michel Barnier, the European Commissioner for Internal Market and Services, has said that the EU will respect the G20’s 2012 financial reform commitments, acknowledging that it was a lack of financial oversight regarding derivatives which lead to the financial crisis. At the end of the month, Barnier is expected to a draft law to incorporate Basel III into EU Law, despite Britain’s feeling that global bank capital rules should not be standardized across all borders.

Many EU lawmakers remain confident that an agreement can be reached by the fall, though whether or not Dodd-Frank OTC derivatives rules will be mirrored in the EU remains unknown.

-Stephanie Kane co-authored this post