EU agrees new derivatives rules, stalls again on bank capital

BRUSSELS/LONDON Thu Feb 7, 2013 4:24pm GMT

BRUSSELS/LONDON (Reuters) - European Union lawmakers pressed ahead with new rules for derivatives on Thursday, helping the bloc meet one global pledge to make markets safer as it struggles to meet another on raising bank capital levels to diminish risk.

The European Parliament, meeting in Strasbourg, France, decided not to proceed with a resolution which, if passed, would have forced regulators to rethink long-awaited derivatives regulation, triggering delay and uncertainty for markets.

EU financial services commissioner, Michel Barnier, said the new rules, which say derivatives trading contracts must be cleared and recorded, can now come into force, most likely mid-March. Currently most derivatives transactions are not cleared and there is no snapshot of trades to see who is exposed, potentially creating huge uncertainties.

"By adopting these standards the EU meets its G20 commitment in the context of the reform of financial services. The new rules will reduce the risks related to derivative transactions," Barnier said in a statement.

The resolution had been brought by lawmakers seeking support for companies who use derivatives to insure against adverse raw material prices. Kay Swinburne, a British centre-right member wanting amendments, said the commission had agreed to provide guidance to those firms to help them avoid compliance costs.

Barnier now needs the United States to accept that the new rules are as strict as their own. This would mean that EU-based firms who do business in America would not have to comply with U.S. rules as well.

He meets with U.S. regulators next week in Washington.

"I will be able to reassure our American counterparts that the EU is meeting its G20 commitment on derivatives, and that we are now in a position to apply stringent rules in Europe that are equivalent to the ones in the United States," Barnier said.

It is unclear whether U.S. regulators can stop their rules from affecting EU firms as they are part of a law Congress adopted.

BASEL STANDOFF

EU lawmakers and member states also tried again to agree key new banking regulation - the Basel III accord that would raise capital levels - but failed.

Agreement is proving tricky because some countries such as Britain want the right to raise capital levels beyond those proposed without having to seek approval from Brussels. Britain also wants to renegotiate the cap on bonuses demanded by members of the European Parliament, which it opposes.

The European Parliament managed to introduce some bonus curbs in a previous round of laws in 2010 and wants to tighten those further in the run up to its election in 2014.

Barnier said last month the capital rules would be applied in January 2014, one year later than envisaged by the G20, but diplomats around the negotiating table say even that will be a challenging deadline to meet.

"At the moment we are in a standoff," an EU diplomat said on condition of anonymity.

(Editing by Sophie Walker)