Trends in banking—clearing out

Trends in banking—clearing out

What are the key issues that have developed in the banking and financial services sectors throughout 2015? Simon Puleston-Jones, chief executive officer at FIA Europe, examines future implementation issues for some of the key pieces of financial services implementation.

What are the key issues that are cropping up this year?

Equivalence has been an issue under European Market Infrastructure Regulation (EMIR 2012), as the European Commission (Commission) has looked to determine

  • whether various non-EU countries have equivalent regulatory regimes to the European ones
  • whether non-EU countries’ central counterparties (CCPs) therefore merit recognition under EMIR 2012, art 25

It’s clearly been most protracted with respect to recognition of the USA, but the Commission and Commodity Futures Trading Commission (CFTC) are focusing all their efforts on reaching a positive resolution.

We have seen further evidence of the negative impact that the leverage ratio under the Capital Requirements Directive IV (CRD IV) is having on access to clearing. To address this, the leverage ratio should be amended so as to recognise the exposure-reducing effect of segregated margin—at present, the leverage ratio does not give clearing brokers any recognition for the fact that, when they clear derivatives for their clients, they are receiving collateral against that exposure. This therefore uses up brokers’ balance sheet capacity to facilitate clearing quicker and reduces the number of client clearing brokers that individual clearing brokers can provide. Nomura, RBS, BNY Mellon and State Street have all pulled out of swaps clearing in the past 18 months. The direction of travel points towards a further contraction in the number of clearing

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About the author:

Neeta has been working as a paralegal in Banking and Insolvency for the past 4 and a half years.

She started her legal career at Allen & Overy in 2008 in the midst of the global financial crisis and the collapse of Lehmans where she gained most of her experience.

Neeta also did a short stint in litigation at the Revenue and Customs Prosecutions Office. Neeta graduated with a 2:1 honours degree from University of London, Queen Mary College and went on to obtain a distinction from the College of Law in the Legal Practice Course. She moved to Lexis®PSL in April 2013.