Brussels accused of ignoring its regulator on hedging rules

Tim Wallace
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BRITAIN and Germany have hit out at the European Commission (EC) for ignoring expert advice on new short-selling and hedging rules and failing to give any reasons why, papers published yesterday revealed.

Four other countries joined them in objecting to the EC brushing aside recommendations from the European Securities and Markets Authority (ESMA), the EU’s financial regulatory body.

But only the UK and Germany voted against the proposals, well short of the number needed to block the Commission’s plans.

“ESMA advice is compiled through a transparent and thorough consultation process, and provides expert understanding from Europe’s supervisory authorities” the countries said. “While we recognise the EC is not obliged to follow ESMA advice, the credibility of the process must be ensured. We therefore request the EC adopts a more open and consultative approach in future.”

But the UK and Germany went further, singling out measures they feel have been changed for the worse – like those limiting how credit default swaps (CDS), insurance against a firm or government failing to pay its debts, are used.

“We regret especially that the hedging requirements concerning CDS are very narrow and inflexible. This could e.g. hinder investments in member states with illiquid CDS markets significantly and hedging against general economic risks.”

The EC could not comment as the consultation period is ongoing.