The EU should scrap the deadline for OTC derivatives reforms to ensure enough time is dedicated to drafting efficient technical measures, a group of trade associations have urged.
The seven groups, headed up by the European Banking Federation and the Association for Financial Markets in Europe, believe the European securities watchdog that will write the technical standards is overworked. The groups say the watchdog does not have enough time to properly consult and implement the measures by the agreed target of January 2013.
The European Securities and Markets Authority will be in charge of writing the European Market Infrastructure Regulation, which will oblige OTC trades to be reported and cleared, among other requirements.
However European policymakers have so far failed to agree on the basic level one text for the regulation. The current text requires Esma to finalise technical standards by 30 June 2012, though the associations doubt it can grapple with writing over 50 technical and regulatory implementing standards – even by the end of September.
“We do not believe that rigid adherence to such a timetable (even in the name of EU compliance with G20 regulatory reform objectives) should be the priority if it comes at the expense of robust, efficient regulation,” says the letter, sent on Tuesday to internal market commissioner Michel Barnier, the European Parliament’s economics committee chair Sharon Bowles, and Danish finance minister Bjarne Corydon.
Set up for the beginning of 2011 to provide European-wide supervision of the securities markets, Esma is only projected to have around 100 employees by the end of 2012. In comparison, the UK Financial Services Authority has around 4,000 staff members.
The industry bodies say that the European Banking Authority and the European Insurance and Occupational Pensions Authority are similarly lacking in staff numbers. They are calling for a new requirement to be put in place, giving the supervisors at least 12 months to draft all technical standards after the level one text has been agreed.
“The ESAs are at the heart of the ongoing financial reforms and are the foundation on which all other reforms are based,” the letter says.
“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.”
Alongside the EBF and Afme, the letter is signed by the heads of the Alternative Investment Management Association, the European Association of CCP Clearing Houses, the Futures and Options Association, the International Capital Market Association and the International Swaps and Derivatives Associations.
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