Isda AGM, the ESAs and euro clearing

Isda AGM, the ESAs and euro clearing

ISDA AGM - read full coverage from

STRUGGLE over European supervisory reform

AMF explains plans to capture London’s euro clearing business


COMMENTARY: Nudge or push?

Last year’s Brexit vote has thrown doubt over the future of the European continent. While the victory last weekend of the pro-EU candidate for the French presidency, Emmanuel Macron, over his pro-Russian rival Marine Le Pen has restored hope that the EU (minus UK) will hold together, there are still many unanswered questions about the shape of its post-Brexit union.

Some of the biggest questions are in financial services: European regulators are already preparing rules to prevent UK-based banks from keeping their EU licences after Brexit; and the French regulator AMF sparked a minor storm at this year’s Isda annual general meeting with its plans to force euro-denominated clearing to move out of London into the EU (while the CFTC’s new chairman protested that geography has been no barrier for EU CCPs in the US).

In addition, the European Banking Authority (EBA) will have to move, despite UK Brexit minister David Davis’s hopes that it could remain in London “subject to negotiation” even after the UK leaves. Dublin, Frankfurt, Paris and Stockholm have all been mentioned as potential new homes for the regulator.

But there are bigger changes afoot than simply a change of address. As reports this week, the EBA and its fellow European supervisory authorities (ESAs) are facing existential questions about their strategy – and even their future as independent entities – in the years to come.

Industry says it would prefer what is called a ‘soft power’ approach, with the ESAs focusing on influencing the behaviour of national regulators through advice and recommendations (the ‘level three’ process of guideline Q&As). The regulators themselves would prefer to exert a more direct, coercive power, as a step towards a European capital markets union, although this could require new or revised legislation.

The EBA in particular faces an uncertain future, with one possibility being either an outright merger or an effective takeover by the European Central Bank – now a more viable option with the UK, the largest non-eurozone financial market in the EU, on its way out of the door. The new form of European financial regulation will take many years to emerge – years during which time the industry will be, as in the past, struggling to discern the shape of things to come.



The gross market value of all outstanding over-the-counter derivatives contracts at the end of 2016 stood at $15 trillion – but through netting, the true gross credit exposures between counterparties those contracts represent is $3.3 trillion.



If I look at the recovery and resolution piece proposed in November, supervision will still be with the colleges. Can you imagine basically supervising three to four central counterparties with 15 or 20 supervisors in a college? How can they do their job properly? The commission is trying to change its course a bit after Brexit, but I find it rather dramatic that Steven [Maijoor] has to say here in public, ‘Look, we need to have the budget to do our work or we cannot do this work’. To hear this, I would be extremely concerned, seeing there are three to four CCPs that basically concentrate all the risk in Europe” – Karel Lanoo, Centre for European Policy Studies

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