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EU delays decision on US securities clearing rules

Thursday, December 11, 2014 - 21:31

[LONDON] The European Union will take another six months to make a decision on whether European banks must hold more capital to safeguard against a US clearing house going bust.

The Commission has to decide whether US rules for clearing houses are as strict as those in the EU. The aim is to ensure that there will be no need to resort to taxpayer cash if things go wrong.

After the financial crisis, EU policymakers have been trying to ensure that clearing houses, which stand between the two sides of a stock, bond or derivatives trade, have the financial resources to ensure the transaction is completed even if one side defaults.

The Commission has already endorsed clearing rules used in Japan, Hong Kong and Australia, prompting speculation in the financial industry that Brussels is using the delay as leverage in a broader spat over the reach of US derivatives rules into the EU.

The Commission said in a statement on Thursday it had extended this month's deadline for higher capital requirements for European banks to June 15, 2015.

The Commission is widely expected to conclude that US clearing houses are just as tightly regulated as their European counterparts. If this is the case, banks in Europe would be exempt from having to hold more capital if they use a US clearing house.

The United States is worried that without such an endorsement, European banks will take their business elsewhere.

Big cross-border clearing houses are run by LCH.Clearnet, owned by the London Stock Exchange, Eurex, owned by Deutsche Boerse, and by two US companies, the CME Group and the Intercontinental Exchange.

REUTERS