European Commission proposed on Wednesday measures to decrease the dependence of EU financial markets on clearing in non-member states, including the United Kingdom.
MOSCOW (Pakistan Point News / Sputnik - 07th December, 2022) The European Commission proposed on Wednesday measures to decrease the dependence of EU financial markets on clearing in non-member states, including the United Kingdom.
"Today's proposal requires all relevant market participants to hold active accounts at EU CCPs (central counterparties) for clearing at least a portion of certain systemic derivative contracts. This will improve the management of financial stability risks in the EU," the commission said.
The central counterparty is an organization that exists to reduce systemic risks and strengthen financial stability while operating between participants of derivatives transactions, in other words, acting as a buyer in relation to the seller and a seller in relation to the buyer. The main purpose of such organizations is to manage risks that may arise if one of the counteragents fails to fulfill its obligations under the transaction.
The commission also presented other proposals in the field of financial clearing to increase the attractiveness of these services in the European Union by simplifying the procedure for launching new products by counterparties.
"Today's proposed measures will make our clearing landscape more attractive by enabling central counterparties (CCPs) - which provide clearing services - to expand their products quicker and easier, and by further incentivising EU market participants to clear and build liquidity at EU CCPs," the commission said.
Weaknesses associated with overdependence on counterparties from third countries should be eliminated, the body said. According to the commission, the European Securities and Markets Authority has already expressed its concerns over risks to the financial stability of the EU, which may arise from "excessive exposures" of EU financial markets to a few UK counterparties.
Now, the European Parliament and the Council will decide on the adoption of the European Commission's proposals.