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EU prepares rules for tackling failed financial firms outside banking 

April 20, 2015

Huw Jones, Reuters

The European Union is looking at creating rules on how to deal with financial firms outside the banking industry that run into trouble, including clearing houses, insurers and asset managers, the EU's financial services chief said on Friday.

The 28-country bloc has already introduced rules on how to wind down troubled banks without turning to taxpayers for cash. It now wants a similar regime for other so-called systemic financial market participants.

EU financial services commissioner Jonathan Hill told Reuters in an interview that he would shortly set out a system specifically for dealing with failed clearing houses ahead of a draft law due to be completed later in the year.

He said the issue had become pressing due to reforms to make the $700 trillion derivatives market safer by channelling these financial instruments through clearers, third party organisations that ensure derivatives trades are completed even if one side of the deal goes bust.

Clearing houses like Eurex Clearing and LCH.Clearnet are set to grow significantly, thus posing risks to financial stability if they collapsed.

Read more: Reuters

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