Derivatives Market Cea Position On EMIR

In the situation of the financial markets crisis, were under careful consideration for the position of high risk derivative over-the-counter derivatives (derivatives over-the-counter or OTC) passed. As mentioned by the Commissioner for the internal market and services, Michel Barnier: "financial markets cannot afford to remain of the areas from the far West. OTC derivatives have a big impact on the real economy, ranging from mortgages food prices.

The lack of a regulatory framework for the OTC derivatives has contributed to the financial crisis and its dramatic consequences that we all suffer.

Today we propose rules that more transparency and accountability to derivatives markets will bring. Then we will know who does what and who should what whom. In addition to taking measures to ensure that we consider disruptive individual failures not the entire financial system, as has happened with the collapse of Lehman

In September 2008 the European Commission proposed an adjustment note of OTC, known as EMIR (European infrastructure regulation) to create and ensure financial stability.

The regulation is currently under discussion will be before the Council that the European Parliament. The central points of the proposal are that: OTC derivatives exchange in the EU must be communicated to the central data, called data folders on the negotiations, the standardized OTC derivative (i.e. derivative that meet the eligibility criteria) "reimbursed by central counterparties" or provides for the presence of stakeholders (the so-called central counterparties) that you are solely between the parties to a transaction ruktensteeds the buyer to the seller of every "buyer" and each salesperson, which allows users of preventing situations in which the collapse of an operator would also collapse, a chain of other participants in the market, the entire financial system in crisis.

Trying to overcome one of the main problems in connection with OTC derivatives market, i.e. the "counterparty risk", i.e. the risk of loss due to the fact that a party not to be paid within the prescribed period.

Should be noted that this idea is not an absolute novelty. Already in the G20 Summit in Pittsburgh in September 2009, turned down the opportunity to give through derivative instruments "clearing houses", or "cases compensation" that function as central counterparties where those who want to Exchange derivatives (as well as other financial instruments) must deposit in order to ensure the effective completion of the contract.

The EMIR also requires you to market participants to measure, monitor, and specific risks of OTC, including by electronic means, to confirm the terms of the contracts on these derivatives. On May 3, 2011 comment CEA threads emerge in Parliament and the Council, only comments of interest to the insurance market move.

In fact, as you note, while agreeing with the need for more efficiency, safety and transparency of financial markets and the creation of a "central clearing" which guarantees that the insolvency of the counterparty, applauding, there is the fear that in this way, you can new systemic risks.

There are fears in particular that the instrument of central clearing "costs are disproportionately for long-term investors such as insurance companies increases.

Eventually, however, these costs will inevitably be a burden on consumers who have concluded insurance policies. Insurers suggest, therefore, an adjustment of the system that takes into account the long-term nature and low-risk insurance for investors profile.

To do this through CEA stresses that EMIR recognizes and gives emergency aid to different risk profile of the market participants in addressing the concerns of the systemic risks and solvency of the counterparties.

Anyway, don't you think that the exemption from the "central clearing" only some long-term investors (pension funds or insurance companies) is the optimal solution, but you imbalances between similar positions in the market can.

It is also considered that the undertakings established in the financial market have different risk profiles and subjected to a different regulatory environment.

Derivatives, insurance companies, for example use it to transfer the risks associated with their exceptional responsibility in the long term. In addition to the insurance funds, from 2013 onwards, the use of derivatives subject to control under the Solvency II directive.

The use of derivatives for insurance undertakings would only risk management function and not speculative. In addition to the insurance sector, we have an industry standard for the use of derivatives; that would at least consider how EMIR to coordinate with other requirements relating to the same scope or related areas.