Brussels, 28 February 2024
A very good morning. It‘s a pleasure to join you at this year‘s Eurex Derivatives Forum. This is a fast-changing area that’s at the heart of a competitive and stable financial system.
Today I’ll focus on the EU rules on clearing, as these rules help to govern many of your activities. And I will update you on the agreement reached between the European Parliament and the Council on the latest version of EMIR, EMIR 3.0.
All of you know how important central clearing is. Clearing reduces the systemic risk posed by over-the-counter derivatives. It’s true to say that a systemic problem in clearing is a big problem and would impact all parts of the financial system. So EU regulators and supervisors put in huge efforts to make sure that EU central counterparties are financially sound and well supervised.
Alongside financial stability, CCPs are also vital for efficient and competitive capital markets, supporting trading and ensuring good management of risks stemming from derivatives transactions. So it is vital that EU clearing rules work, and work well.
That includes mitigating some of the risks that stem from the EU‘s excessive reliance on central counterparties located outside the European Union. And so the newest version of EMIR is about ensuring that the EU‘s clearing ecosystem is both safe and attractive.
So first, if we‘re serious about the Capital Markets Union, we need efficient market infrastructures within the European Union – including CCPs. I have been delivering this important message for some time. Our new rules – just agreed – will enable CCPs to bring new products to the EU market faster.
This will give market participants an incentive to clear and build liquidity at EU CCPs. For instance, the Council and the Parliament agreed to shorten the process for EU CCPs to expand the services they offer.
I hope that in time, private initiatives, together with these new rules, will help increase the supply of derivative and clearing services in the EU. And that will help us reduce the risks around excessive exposures to CCPs outside the EU.
Now second, if we‘re increasing the amount of clearing that takes place inside the EU, that brings new risks that need to be appropriately supervised. While a CCP might be based in one EU country, the impact if it experiences any problems wouldn’t be limited to that one country.
And there could be major consequences for financial and non-financial companies based elsewhere that use its services. That reality required us to take a look at improving supervision at EU level.
The Commission proposal was to give more powers to ESMA. The final agreement does not go as far as our original proposal. But the new rules will still support better EU supervision of CCPs. ESMA‘s role will be stronger than it is today, with reinforced cooperation between ESMA and national supervisors. And we’ve drawn lessons from the market events of recent years.
Third, the new EMIR rules are about reducing our dependence on non-EU CCPs that are systemic and that could impact the EU‘s financial stability. Our over-dependence on a country outside the EU for central clearing presents a risk to our financial stability. If financial stress were to affect derivative markets, EU regulators would not be in the driving seat to deal with it.
Indeed in a crisis, regulators outside the EU could take extraordinary decisions very quickly, without involving the EU and without looking at the impact on our financial stability.
Now this is a vulnerability that we need to address. That vulnerability was addressed in our EMIR proposal by way of an active account requiring market participants to clear a portion of their derivatives at EU CCPs. And this was a key part of the reform.
Here, I can say that the final agreement is not as ambitious as I would have hoped. It is complex, it includes a lot of exemptions, and it is relatively light for the largest market participants. That said, I do believe the agreement could incentivise the rebalancing of risks from systemic non-EU CCPs to EU CCPs, even if there is no guarantee of a significant decrease of risks very soon.
And importantly, there is a strong review clause. ESMA will have to produce a report on how our aims are being met, 18 months after the new rules enter into force. And that report will contain objective data and a cost-benefit analysis. If necessary, ESMA‘s report will include recommendations for quantitative thresholds for EU market participants if the situation has not evolved favourably.
ESMA will consult the EuroSystem and the European Systemic Risk Board, as well as the EBA and EIOPA. On the basis of this report, the Commission will produce its own report, and it may decide to propose new legislation.
So the revised EMIR will soon come into force – but this is not the end, but rather the first steps of addressing our concerns. So I ask the industry to continue to pay attention to this issue, and to actively reduce exposures to systemic CCPs outside the EU.
My thanks again for this opportunity to join you. I’m sure you will have many useful and possibly lively discussions about the future of derivatives and clearing over the next couple of days. But just to close with another reflection on the agreement on EMIR and clearing.
I welcome the agreement. It will help address the EU‘s overreliance on systemic non-EU CCPs, in particular, the measures to facilitate the supply of clearing services in the EU and strengthen EU-level supervision. I would have preferred a higher level of ambition on the active account.
More progress should be made in the future, during the mandate of the next Commission. I repeat – if we are serious about the Capital Markets Union and open strategic autonomy, we will need to build on this agreement. So this is good work, but it is only the beginning. I wish you a very fruitful conference.
Thank you.