FRANKFURT/LONDON (Reuters) - The European Central Bank needs to have appropriate oversight of both domestic and foreign clearing houses if it is to lend them cash when they need it, ECB board member Benoit Coeure said on Wednesday.
Coeure questioned proposals that would give the ECB greater control over central clearing counterparties (CCPs) from outside the European Union while leaving domestic ones under the authority of domestic supervisors.
“A responsible central bank cannot extend liquidity to any entity without having a minimum level of information and control over it,” said Coeure, who oversees the bank’s market operations and international relations.
“It would be rather strange if such differentiation were to make it more difficult for us to provide liquidity to EU than to third-country CCPs,” he told an ECB event.
Clearing houses, essentially the middle man between buyers and sellers of financial assets, have come into greater focus due to Brexit because much of the euro clearing business takes place in the London Stock Exchange’s LCH clearing arm.
Britain is due to leave the EU next month, putting it out of direct reach of the bloc’s regulators.
To remedy this, the EU is approving a law that would mean LCH and other major foreign clearing houses could only serve EU customers if the bloc’s regulators supervise them alongside their home watchdog.
During a major market crisis, the ECB could have a say in how much cash or margin a foreign clearing house would require customers to set aside against euro denominated trades.
U.S. regulators have voiced opposition to such potential interference in U.S. clearers like ICE and CME, while LCH has said clearing firms’ home regulators should be in charge during a crisis.
Terry Duffy, chairman and chief executive of CME Group, said he was concerned, adding that the ECB should have no right to discuss margin policy at a foreign entity.
“By law, in the United States, I can only have one regulator and that is the CFTC,” Duffy told reporters in London.
“We shouldn’t be telling Europe how to regulate their markets, and Europe should not be telling the U.S. how to regulate their markets,” Duffy said.
Reporting By Francesco Canepa; Editing by Balazs Koranyi