Safety and infrastructure of EU financial markets (EMIR)

The governments of the 20 biggest economies, the G20, decided to regulate certain complex financial products which were at the heart of the U.S. mortgage crisis.

The problem with these products was that their structure was negotiated over the counter (OTC), so they were customised and no one could know exactly how the market functioned or what its total value was.

The riskiness and destructive potential of these products only became apparent when the U.S. housing market crashed.

In a bid to avoid similar risks in Europe, the European Commission published a proposal for a Regulation based on the G20 decision. That proposal covers OTC products and so-called clearing houses.

The Greens deem it essential for the European Securities and Markets Authority (ESMA) to have a full overview of all risks in the derivatives market.

Therefore deals between financial and non-financial institutions should also be disclosed to ESMA.

To minimise reporting exceptions, we want legislation to define as OTC transactions all derivatives not traded via clearing houses.

ESMA should help to standardise contracts, so that they can be more easily be traded via clearing houses, and clearing houses should provide financial insurance sufficient to hedge against market turbulence.

Such firewalls would help to prevent financial turmoil from spreading from one bank to another.

The Greens convinced a majority in Parliament that our proposals contributed a valuable contribution to financial stability and thus would serve taxpayers and investors.

Many of the improvements we suggested also survived intact after negotiations with the Member States in the Council.

The Greens proved unable to secure an active role for ESMA in standardising contracts and intervening in the event that national supervision fails.

The United Kingdom, Germany and France in particular all opposed enhancing the safety of European financial markets.

We were also disappointed that the Member States failed to recognise clearing houses as cross-border financial institutions, even though they deal with banks and other actors from throughout the European market.

Already during its negotiations with other groups the EPP introduced a transition period for pension funds and the ALDE insisted on exemptions for foreign exchange derivatives, probably as a consequence of lobbying pressure.