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European Commission - Speech - [Check Against Delivery]

Speech by Vice-President Dombrovskis on EMIR REFIT

Brussels, 4 May 2017

Today, the European Commission is taking another step in the fine-tuning of our financial sector framework, which we have put in place since the crisis. We are proposing targeted adjustments to the European Market Infrastructure Regulation. We are also setting out a process to consider necessary changes in the supervision of critical clearing infrastructure.

Derivatives are a key part of our financial markets and account for hundreds of trillions of euros in volume. Under the right conditions, they contribute to financial stability, by allowing market participants to redistribute risk among each other. For example, they allow exporters to fix their prices despite fluctuating exchange rates, and banks to offer fixed-rate mortgages even as interest rates move.

However, the financial crisis showed that derivatives can also be a key channel of risk contagion. A lack of transparency and complex inter-linkages in markets for over-the-counter derivatives allowed contagion to rapidly spread across the global financial system.

The European Market Infrastructure Regulation, or EMIR, was put in place in 2012 to address these concerns. By imposing centralised clearing of over the counter derivatives, the rules protect from the risk of default of one of the parties. And by requiring reporting of all derivative contracts, the rules provide the transparency needed for regulators to ensure financial stability.

Today's proposal builds on our call for evidence on financial regulation. EMIR is doing well overall. However, there is room for targeted adjustments to make it more proportionate and efficient. Our aim is to achieve the same prudential results but with less cost to Europe's companies and our economy. This is the approach the EU is taking when we review our financial regulation. It is also the approach taken by international bodies and recently endorsed by the G20 in Baden Baden.

Our main proposals today include the following:

  • We are streamlining our reporting rules to alleviate reporting requirements in particular for businesses, without compromising on the quality of the data collected. These changes could save businesses up to €1.1 billion in operational costs and up to €5.3 billion in one-off costs.

  • We are providing three years to develop technical solutions for pension funds to take part in central clearing while protecting the revenue of future pensioners. While central clearing for pension funds remains our clear goal, this temporary exemption will help them avoid estimated losses of up to €1.6 billion.

EMIR is a success, but due to this success ever more derivatives are centrally cleared. For example, between 2009 and 2015, the share of centrally cleared interest rate over-the-counter derivatives went up from 36% to 60%. This is the most common type of derivative.

At the same time, the EU clearing business tends to strongly concentrate in a small number of central counterparties, or CCPs. This concentration increases the importance of the most significant CCPs for the financial stability of the EU as a whole.

And so it makes sense that the EU carries a certain amount of common responsibility for their supervision. This is an issue we are considering, as we further develop our Capital Markets Union and review the functioning of the European Supervisory Authorities.

It is relevant for EU CCPs, but it is also relevant for third country CCPs.

Based on strong international standards to which we are committed, we have now a well-established system of equivalence. 15 countries and 28 CCPs outside the EU have been recognised, and we will stick to this principle of equivalence.

Some third country CCPs play a key systemic role for EU financial markets, and have a particular impact on the responsibilities of EU and Member States institutions. Our supervisory framework also needs to deal with these specific situations.

This is particularly relevant in the context of the UK leaving the EU, and therefore also leaving the EMIR framework. The UK currently plays a key role in providing clearing services in Europe. For example, as many as 75% of euro-denominated interest rate derivatives are cleared in the UK.

It is also an issue which has been raised by many stakeholders from EU institutions and Member States. It is important to start more detailed deliberations on this soon, to give businesses clarity on the regulatory situation in the EU. We intend to propose further legislative proposals on CCPs in June, based on an impact assessment.

For third country CCPs which play a key systemic role for the EU, we are looking in particular at two possibilities for enhanced supervision: We can ask for enhanced supervisory powers for EU authorities over third country entities. Or such CCPs of key systemic importance for the EU could be asked to be located within the EU. We now need to look at these options in the impact assessment.

While minimising the risk of market fragmentation, the EU needs to be able to ensure supervisory oversight over such key CCPs.

Thank you very much.


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General public inquiries: Europe Direct by phone 00 800 67 89 10 11 or by email

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