A key meeting on the European Market Infrastructure Regulation (EMIR), which seeks to reform the region’s OTC derivatives markets, has been rescheduled only days after an alliance of Europe’s securities industry associations warned the European Commission and Parliament about delays.
Sources at the office of MEP Sharon Bowles, who chairs the Parliament’s Economic and Monetary Affairs Committee (ECON), confirmed to theTRADEnews.com that an email had been circulated stating the trialogue meeting on EMIR, previously scheduled for Monday 23 January 2012, has been put back and attendees should "stand by for further details".
Billed as Europe’s response to the Group of 20’s pledge to bring OTC derivatives onto centrally cleared, exchange-like platforms, EMIR has already faced serious setbacks as European legislators attempt to determine the role that the European Securities and Markets Authority (ESMA) should play in governing clearing houses. The meeting on 23 January was intended to iron out remaining issues, with a view to finalising the new rules shortly after. ESMA was then due to begin writing the accompanying technical standards.
Earlier this week, several of Europe’s securities industry associations, including the Alternative Investment Management Association (AIMA), the European Banking Federation (EBF), the Futures and Options Association (FOA), the Association for Financial Markets in Europe (AFME), the European Association of CCP Clearing Houses (EACH), the International Capital Market Association (ICMA) and the International Swaps and Derivatives Association (ISDA), sent a joint letter to the European Parliament and Commission. The letter expressed anxiety that European securities reform was in danger of reaching rushed conclusions, due to the heavy workload assigned to the single market's three European Supervisory Authorities (ESA) that oversee the regulation of financial services across Europe – ESMA, the European Banking Agency and the European Insurance and Occupational Pensions Authority.
“We fear that the ESA’s ability to address their responsibilities for drafting these standards, as well as properly assessing their impact, may be undermined by current circumstances,” said the document. “Legislation such as EMIR and the Regulation on Credit Default Swaps and Short Selling requires ESMA to adopt implementing and technical measures within very short timeframes. Such demands jeopardise the goal of drafting high quality and credible regulation.”
The letter expressed consternation that level 1 EMIR regulation has still not been agreed, despite the fact that ESMA is required to finalise technical standards by 30 June 2012. Even an extension to 30 September 2012, which has been suggested by some observers, would be insufficient, insisted the industry associations. Since there are over 50 technical and regulatory implementing standards, the letter suggested that rigid adherence to such a timetable should not be prioritised if it comes at the expense of robust, efficient regulation.
Level 1 regulation generally concerns the ‘broad-brush’ issues politicians handle directly, while level 2 regulation consists of the more precise technical details of implementation handled by specialist bodies such as ESMA. The document suggests that timelines for level 2 implementation should not be defined in absolute date-specific terms. Rather, it suggests specifying a period for ESA drafting, starting from the date when the level 1 measure is adopted. A period of no less than 12 months should be allowed post-adoption for the ESAs to draft standards. It also suggests that a principle of prioritisation should be incorporated in the level 1 mandates so that if all tasks cannot be achieved over a specific period, a phased approach should be taken.
“The ESAs are at the heart of the ongoing financial reforms and are the foundation on which all other reforms are based,” said the document. “We believe that it is very important to give them adequate time and resource to achieve high quality financial reform, underpinning a strong and stable European economy.”