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The European Union is proposing to give the European Central Bank sweeping powers over foreign clearing houses in times of market stress, an EU document showed, as the bloc shows little sign of heeding U.S. calls to water down the plans.
The bloc has proposed changing the ECB’s statute to give it a broad role in the oversight of EU and foreign clearing houses that handle large amounts of euro-denominated securities. That would include those in London, which will lie outside the EU in five months’ time.
Now the current EU president Austria has proposed fleshing out the role with detailed powers, such as being able to force foreign clearing houses to “submit information, cooperate in the assessment of their resilience to adverse market conditions, and open overnight deposit accounts”, the document said.
The EU wants the changes approved in time for Britain’s departure from the bloc next March. LCH, a unit of the London Stock Exchange (LSE.L), dominates clearing of euro-denominated interest rate swaps and will be outside the EU.
Austria has called on EU member states on Friday to stop arms exports to Saudi Arabia after the killing of journalist Jamal Khashoggi.Foreign Minister Karin Kneissl, whose country holds the EU’s rotating presidency, said the killing of Khashoggi at the Saudi Consulate in Istanbul was an “unprecedented breach of law”.She accused Saudi Arabia of practicing massive human rights violations at home, and their controversial policies in the Middle East region.“Especially the horrible war in Yemen and the Qatar crisis should be reason enough for European Union members to adopt a common stance towards Saudi Arabia,” Kneissl told Die Welt newspaper.Iran MP calls for ‘trying’ Riyadh over Khashoggi murder“If we all, the entire European Union, would stop arms deliveries to Saudi Arabia, this can contribute to ending these conflicts,” she added.Khashoggi, a columnist for the Washington Post, was last seen on Oct. 2 when he entered the Saudi Consulate in Istanbul.After weeks of denying involvement in his disappearance, Saudi Arabia on Saturday announced that he died in a fight inside the consulate.On Sunday, Saudi Foreign Minister Adel al-Jubeir admitted that Khashoggi had been killed inside the consulate, but insisted that Mohamed bin Salman -- Saudi Arabia’s high-profile crown prince -- had been unaware of a plot to murder the journalist.Turkish FM discusses Khashoggi case with Saudi counterpartNorway wealth fund plans to double Saudi investmentsCall by Khashoggi’s fiancée caused Saudi hit squad to panic, dump journo’s remains in well
Austria calls on EU to halt arms sales to Saudi Arabia
In exceptional situations, the ECB could force a foreign clearing house to comply with temporary requirements on how much margin customers should post to back trades, the level of collateral, and how frequent intraday margins should be collected, tasks normally supervised by the home regulator.
Financial lawyers say this would, for example, give the ECB power to stop a foreign clearing house raising margins on euro-denominated positions in times of market stress.
The ECB has long been concerned that so much euro-denominated trade is already conducted outside the euro zone in London, and appears keen to bring this under its supervision after Brexit.
Some policymakers had wanted to stop a clearing house from increasing margins during the euro zone debt crisis, saying this amplified stress in markets.
The United States is unhappy about the EU plans.
Christopher Giancarlo, chairman of the U.S. Commodity Futures Trading Commission which regulates the American derivatives market, has threatened retaliation against EU financial firms if the bloc does not water down what he sees as overly intrusive proposals affecting U.S. clearers such as CME and ICE.
The European Commission has dismissed this as “blackmail” and a working group of EU member state representatives could give the proposals the green light next Tuesday.
Member states would then thrash out a final text with the European Parliament, which has already backed similar proposals.