LONDON Feb 4 A panel of European Union
lawmakers on Monday narrowly rejected a set of new derivatives
rules, potentially leading to months of uncertainty for users of
regulations instigated during the 2007-09 financial crisis in an
effort to make markets safer.
The European Parliament's economic affairs committee meeting
in Strasbourg, France, voted 24-20 to rethink the rules, which
G20 countries had pledged to introduce after the crisis - in
which opaque derivatives played a part.
The lawmakers felt the rules, authored by regulators, failed
to reflect accurately a framework law they had already approved.
Committee chair Sharon Bowles, a British Liberal Democrat,
accused regulators of "breaching and stretching" the underlying
law, but said changes could be "written in an evening" to avoid
undue delay for markets.
Lawmakers were concerned that exemptions from the rules for
"non-financial" companies, such as airlines, which use
derivatives to insure against fuel price increases, were worded
too restrictively and could damage hedging in the economy.
Some lawmakers, however, warned that the EU's commitment to
fulfil G20 pledges would be questioned by the United States and
others if the rules had to be reworked.
"We are in unchartered territory. We don't know where we are
heading," said Werner Langen, a German centre-right lawmaker who
supported rejection of the rules.
The vote is a slap in the face for the EU's executive
European Commission, which had endorsed the measures. Patrick
Pearson, a Commission official, dismissed the challenges.
If full parliament backs the committee, the Commission and
the European Securities and Markets Authority will have to
propose alternatives, leaving banks, markets and companies
guessing over how to prepare.
The G20 group of the world's biggest advanced and developing
economies had pledged to introduce the rules by the end of 2012
but there have been delays in the EU and United States, where
most of the world's $640 trillion derivatives are traded.
The rules are a response to an international push to make
derivatives markets more secure after the crisis by introducing
central clearing for certain products.
Clearing ensures a derivatives trade is completed and
provides backup if any parties run into financial difficulty.
Companies that use derivatives to hedge against adverse
moves in raw material prices or interest rates have been given
exemptions from clearing their derivatives if the value is below
a threshold set by regulators.
The lawmakers said the threshold would be triggered too
quickly because it was based on gross positions and want to use
They also objected to non-financial firms having to clear
all classes of derivatives even if they hit the clearing
threshold in only one asset, such as commodities.
It was the first time parliament has used certain powers
given to it under a revised EU treaty to challenge implementing
measures for a law, a sign of how it is becoming more assertive.