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EMIR ‘significantly at risk’ of failure warns FIA Europe 

June 10, 2015

Elliott Holley, Banking Technology

Industry association FIA Europe is calling on regulators to make changes to derivatives laws, including amendments to Basel III and MiFIR, as well as EMIR reporting obligations. The association argues that without the changes it is advocating, the viability of some of the new rules will be at risk.

In its latest whitepaper, ‘A review of the cumulative effect of European derivatives law reform’, FIA Europe notes that different regulatory approaches have been taken in the UK, the US and Europe on reporting, margining, trading and other requirements, leading to overlap and unnecessary duplication of rules, as well as some conflicts. In response, the association has set out seven recommendations covering leverage ratio, indirect clearing, pre-execution and STP checks, cross-border regulation, reporting, thresholds and industry feedback.

Of these, the single most important is that the leverage ratio under Basel III should be amended to recognise the exposure-reducing effect of segregated margin. “Without that important change, the viability of clearing under EMIR is significantly at risk, ” said Simon Puleston Jones, chief executive  of FIA Europe. FIA believes that the European Commission’s EMIR legislation and the Bank of England’s CRD IV rules do not mutually re-enforce the G20 objective of increasing the extent to which derivatives are cleared via CCPs, because the costs introduced by CRD IV have resulted in clearing brokers leaving the industry, thus reducing access to central clearing.

Read more: Banking Technology

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