Jan 6 The European Union and United States make
up most of the world's capital market and are adopting rules to
lessen the need for more bank bailouts in future crises.
The rules follow pledges made by the G20 group of leading
countries but some differences are emerging, worrying a highly
global financial industry.
The following is a comparison of laws under discussion:
U.S. House of Representatives approved in mid-December a
law to require central clearing of standardized
over-the-counter (OTC) derivatives contracts, with trading on
exchanges where possible. Swaps not cleared centrally must be
reported. But big users such as airlines can be exempted from
Regulators, under House bill, would set position limits on
some contracts. Financial firm clearinghouse stakes capped at
Senate has competing bills that will need to be merged with
House bill and wants narrower range of exemptions.
European Commission to propose EU law mid-2010 to mandate
central clearing of wide range of OTC contracts, give
supervisors powers to set position limits, require reporting of
trades to repositories.
Unclear if corporates will get exemptions from clearing. EU
less categoric than United States on need for exchange trading.
No caps on ownership of clearing houses anticipated.
EU governments have preliminary deal on draft law to
centralize bank, insurance, markets supervision via three
bloc-wide authorities. New risk monitoring board hosted by the
European Central Bank to be created but with no binding powers.
European Parliament has joint say and may make changes.
U.S. House has approved bill to set up inter-agency
Financial Services Oversight Council to monitor systemic risk.
Firms can be ordered to break up, submit "living wills". This
goes much further than EU's planned risk body. No pan-EU powers
to break up banks or deal with troubled firms even though
cross-border firms dominate bloc's financial sector.
U.S. House bill also creates new consumer watchdog to
regulate mortgages, credit cards, other financial products -- a
step EU is not planning and which U.S. Senate has doubts over.
EU has adopted new rules forcing banks to retain 5 percent
of risk in securitized products they originate. It also capped
how much banks can lend to each other and set up colleges of
supervisors for cross-border firms.
EU finalizing adoption of additional rules to increase how
much capital banks must set aside to cover risky trading
activities and increase capital requirements on re-securitized
products. Supervisors would also have powers to slap extra
capital requirements on banks whose pay packages encourage
overly risky behavior.
U.S. House has also adopted rules requiring 5 percent
retention of securitized products and powers to curb bank
lending. EU and United States have pledged to adopt new global
bank capital and liquidity rules now being thrashed out by the
Basel Committee on Banking Supervision.
All G20 countries, including United States and leading EU
countries have agreed to guidelines on structure of bank pay
packages to reduce overly risky behavior
Britain introducing one-off tax of 50 percent on 2009 bonus
round. France may follow suit. No sign United States will
introduce windfall tax.
HEDGE FUNDS, CREDIT RATERS
EU expected to adopt law this year requiring mandatory
registration and reporting requirements for managers of hedge
funds, other alternative investments.
EU has adopted law introducing mandatory registration and
direct oversight of credit rating agencies by national
securities watchdogs this year.
U.S. House agrees hedge funds, private equity firms,
offshore funds must register with SEC, which will also get new
oversight over credit rating agencies.
G20 has set mid-2011 deadline for converging world's major
accounting systems, with focus on making International
Financial Reporting Standards used in over 100 countries,
including Europe, more global. United States standard setter
leaning to more radical reform on valuing assets, a step that
compiler of IFRS has said it won't follow.
(Reporting by Huw Jones in London and Kevin Drawbaugh in
Washington, D.C.; Editing by Andrew Hay)