EU regulators push for clearing and settlement compromise

EU regulators push for clearing and settlement compromise

European securities watchdogs have published revised proposals for harmonising clearing and settlement in an effort to broker a compromise between depositories and custodian banks over the imposition of tougher regulatory standards.

The revised blueprint from the Committee of European Securities Regulators (CESR) and the European System of Central Banks (ESCB) covers 19 draft standards aimed at making Europe's patchwork clearing and settlement systems safer and more efficient.

An inital draft of the rules calling for the imposition of tougher standards on banks operating "systemically important" clearing and settlement systems met with howls of protest from agent banks operating under the banner "Fair & Clear".

The latest proposals fudge the issue by accepting the banks' arguments that the Basle II capital framework provides an adequate vehicle for risk management, but suggests a possible increase in collateralisation of credit exposures.

BNP, a lead bank in the Fair & Clear movement, has complained that collateralisation will raise costs and make it more difficult to compete with depositories.

In a statement, the CESR says: "The new version of the report reflects a compromise that takes into account both the public interest and the interest of the parties involved."

The latest set of proposals - which also call for trade confirmation at T+1 and rolling settlement cycles of T+3 or less - will be debated at an open hearing at the premises of CESR in Paris on 25 May.

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