BRUSSELS/LONDON May 4 The European Union has
proposed easing its derivatives rules in a move which will save
pension funds billions of euros, as it seeks to boost its
capital markets union (CMU) after Britain's decision to leave
New rules were introduced in 2012 after the then opaque
sector accentuated the 2007-09 financial crisis, but policymaker
focus has by now shifted to helping the "real economy" create
jobs by cutting red tape for companies and investors, though not
for big banks.
The European Commission proposed a draft law on Thursday to
continue shielding pension funds - a sector it sees as critical
for investment in infrastructure - from having to clear their
derivatives trades for a further three years, saving them
billions of euros in collateral requirements.
"Our aim is to simplify rules as well as to eliminate
disproportionate costs and burdens to small companies in the
financial sector, corporates and pension funds," European
Commission Vice President Jyrki Katainen, said in a statement.
Brussels is trying to encourage companies to use markets to
raise funds and wean them off their heavy reliance on bank
But CMU has made slow progress, suffering a knock after
Britain, by far the EU's biggest capital market, decided to
leave the bloc in 2019. Efforts to revive securitisation, a form
of debt security, have also stalled.
Thursday's plans, which need approval from the European
Parliament and EU states to become law, are among the first
after a root-and-branch review in 2015 of crisis-era financial
As reported by Reuters, only one side of a derivatives trade
would have to report it, helping to cut compliance costs.
The commission said such changes could save market
participants, especially energy companies and manufacturers, up
to 2.6 billion euros in operational costs and up to 6.9 billion
euros in one-off costs.
Brexit has also prompted the commission to look again at how
derivatives are cleared, a process carried out by a third party
to ensure a trade is completed.
The commission said it intends to present further
legislative proposals before the summer to address "important
and emerging" challenges in derivatives clearing.
"In this context, it should also ensure effective
supervisory arrangements for clearing houses located outside the
EU that clear substantial volumes of derivatives denominated in
EU currencies and play a key systemic role for EU financial
Euro zone policymakers have said that the bulk of clearing
of euro-denominated securities like derivatives and bonds should
move to the single currency area.
The London Stock Exchange's LCH clearing house
clears most euro-denominated trades, but this activity will be
outside the bloc's legal framework after Brexit.
(Reporting by Huw Jones; Editing by Elaine Hardcastle)