EU/US Joint Statement- we’re still together

July 15, 2014

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Regulators from the US and EU met on 8 July to host a meeting of the Financial Markets Regulatory Dialogue. Each side brought an alphabet of agencies, subjects covered included key G20 reforms: Basel II capital\leverage\liquidity rules, respective implementation of derivatives reforms, and resolution planning[1].

Derivatives– a mutual pledge to provide greater certainty regarding trading, clearing and reporting. The EC will continue to work with the SEC and CFTC to further equivalence for US CCPs and in risk mitigation techniques. The SEC will continue to finalise its cross-border proposals. The EC and the CFTC, in line with “the Path Forward”, will discuss the treatment of foreign SEFs and CCPs and emphasise the importance of discussion and coordination on margin requirements for non-cleared derivatives.

Market Structure and HFT– the EU explained the rules in MIFID II with respect to HFT, while the SEC outlined their plans in this area. Participants agreed to continue to cooperate on the regulation of algorithmic trading.

Resolution– agreed that the Financial Stability Board should issue proposals for an international standard on gone-concern loss-absorbing capital for G-SIBs at the G20 summit in November 2014. Each side committed to work together to devise solutions to challenges in cross-border resolution.

Insurance– continued work towards a covered agreement on reinsurance collateral.

Banking– continue to seek effective implementation of the Basel III standards.

Benchmarks– considered the ongoing international review and the proposed EU Benchmark Regulation. Reiterated support for the IOSCO Principles for Benchmark Reform.

This anodyne joint statement is more note than news-worthy. It remains to be seen whether “continued cooperation” across all these fronts is more a statement of intent than reported fact. Against a background of increasing mutual frustration between the world’s two largest financial regulators, perhaps the best that can be said is that the divorce is not finalised yet.

[1] As well as: insurance, money market funds, alternative investment fund managers, securitisation, high-frequency trading, accounting, disclosures, audit, benchmarks, corporate governance, data transfers and information sharing… a busy day then.