Michel Barnier, European Commissioner for Internal Market and Services, writes in an op-ed published yesterday that the next challenge to global financial regulators is to use the reforms enacted since the financial crisis as the foundation for a single, global framework. Commissioner Barnier uses derivatives as an example of how this relationship could work.
He writes that the European Markets and Infrastructure Regulation (EMIR), the European Union’s set of rules for derivatives transactions, is broader in scope than the Dodd-Frank Act, which regulates U.S. markets. He argues that in terms of company size, foreign-exchange transactions, clearing houses and transparency obligations, the EU rules are more rigorous than those in force in the U.S.
“The EU system creates a solid basis for cooperation between international regulators,” which, according to Commissioner Barnier, “is essential because the derivatives market is global and all trades must be regulated in broadly similar ways.”
Imposing U.S. rules worldwide is an approach pushed by some, he notes. Yet, Commissioner Barnier claims that such an approach won’t “deliver the outcome we all seek.” He argues that the U.S. approach is flawed because it creates the opportunity for regulatory arbitrage and inconsistencies, and its efforts to protect its taxpayers from global risk will be self-defeating.
He writes that, “Cooperation and mutual reliance, not confrontation, will protect investors and taxpayers far better than duplication and protectionism. The creation of such a binding, and mutually beneficial, framework is one of the main reasons Europe wants financial-services regulation to be included in the negotiations toward a free-trade agreement with the U.S. that begin in July.”
Commissioner Barnier insists that the EU and the U.S. must take the lead in protecting the global economy from the dangers of “financial weapons of mass destruction.”
Read the full Bloomberg article here.