EU Seeks U.S Swaps Rule Deal Before Bank Capital Deadline

The European Union’s financial-services chief said he’ll push for a deal with the U.S. on rules for swaps clearinghouses by a June 2015 deadline.

Jonathan Hill said in an interview in Brussels that he sees “encouraging” signs that the impasse, which has implications for EU-based banks’ capital requirements, can be brought to an end.

“It needs to be resolved,” he said. “It would be good for the U.S. and for us if it is resolved, and I think we’ve got a good opportunity to get it done satisfactorily.” Hill said he plans to travel to the U.S. early next year.

The European Commission, the EU’s executive arm, and the U.S. Commodity Futures Trading Commission have repeatedly clashed over the scope of their rules for the $691 trillion market for swaps and other over-the-counter derivatives, as regulators seek to plug loopholes exposed by the 2008 financial crisis.

In the EU, the commission decides if another country’s rules are as tough as the 28-nation bloc’s own standards. These so-called equivalence decisions have implications for market access and other requirements. Firms based in nations that are judged equivalent can in some cases access the European market without having to comply expressly with EU regulations, because their domestic rules are deemed as strong.

Twice Delayed

Under EU banking legislation approved last year, the commission is responsible for deciding whether other nations’ clearinghouses have standards that are as robust as those applied in Europe, with the region’s banks to face tougher capital requirements when dealing with platforms that don’t make the grade.

The EU, has twice delayed a deadline for these rules to kick in to allow more time for talks with the U.S. over discrepancies between European standards and the CFTC’s rulebook. The latest extension pushes the date to June 15.

Banks have urged regulators to find an accord, warning of damage to global markets if one isn’t reached.

Hill said he would be “very disappointed” if a deal can’t be reached before this new deadline.

“It would be much better to have a proper fix, because I think people need certainty, and I think we should be able to do that.”

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