Calls are growing among market practitioners for a single body within regulators such as the European Commission, focused solely on solving ongoing issues related to the cross-border impact of securities regulation.
A lack of agreement, or mutual recognition, between the European Commission and the US Commodity Futures Trading Commission on their post-crisis regulatory regimes has threatened to subject firms with transatlantic businesses to overlapping and contradictory regulations.
Simon Puleston Jones, chief executive of futures lobby group FIA Europe, said a dedicated body within each regulator could help solve the issue in the future.
He said: “You would only need a small handful of people within the Commission, say, focused solely on regulatory cohesion, both extra-territorially and within the EU, to figure out in what way one piece of regulation interacts with another.”
Anthony Belchambers, Puleston Jones' predecessor and now a special adviser to FIA Europe, said the idea of a separate body was “absolutely right”.
He added: “There is a real opportunity to energise dialogue on mutual recognition at the moment. There needs to be some sort of dedicated group of regulators who are committed to making sure cross-border regulation is reasonable.”
Belchambers is leading an effort by a group of global trade bodies to develop international standards on cross-border rulemaking. The group has recently presented its views to supra-national body the International Organisation of Securities Commissions. Iosco is set to release a consultation paper on standards around mutual recognition before the end of the year, a spokeswoman confirmed. Iosco established of a task force on cross-border regulation last July, led by Ashley Alder, chair of the Hong Kong Securities and Futures Commission.
Lord Hill, the incoming European Commissioner for Financial Services, this week raised the prospect of an omnibus directive to develop a single "third-country regime" across all pieces of EU legislation when being questioned by MEPs to approve his appointment.
Cross-border issues are to come into sharp focus later this year because of capital treatments arising under Basel III - which are being implemented in Europe via the Capital Requirements Directive IV. This will allow banks to hold a lower level of collateral against trades that are passed through EU-approved clearing houses — also known as qualifying central counterparties, or QCCPs. This charge jumps much higher if the clearing house is not approved by the EU.
A lack of recognition between the US and European regulators has stalled the approval of US clearing houses as QCCPs, with a grace period allowing banks to apply lower risk weightings to non-QCCP cleared trades ending on December 15. After this date the cost of European banks swaps' exposures to non-QCCPs could soar.
EC officials have mooted a further six month extension of the deadline at industry conferences in recent weeks, but EC spokespeople have not commented formally on the issue. However, Timothy Massad, chair of the CFTC, said yesterday in a statement made before the Global Markets Advisory Committee Open Meeting, that he was "pleased that [the EU] have decided to postpone the imposition of higher capital charges on European banks participating in our markets".
In his statement yesterday, Massad also added: "Europe has not yet recognised our clearinghouses as equivalent...[but] I believe they should because our clearinghouses meet international standards. They believe we should change our regulatory approach to clearinghouses that are located in Europe but are also registered with the US.
However, he added the regulators had "agreed to look at whether we can further harmonise our rules and regulatory approach".
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