EU ministers set to back shortselling curb

City A.M. Reporter
European Union finance ministers look set to back a ban on naked or uncovered selling of sovereign debt and shares when they meet next week, diplomats have said.

The draft measure will also need approval from the European Parliament to become law and joint talks are expected to be tough as the assembly wants more stringent curbs.

Ambassadors from the bloc's 27 states were unable to reach a formal consensus but diplomats said there was enough of a majority for ministers to formally vote through a compromise put forward by EU president Hungary.

"We have seen strong support for the presidency proposal. A few countries voiced some reservations," a spokesman for the presidency said after the meeting of ambassadors.

"It's now on the agenda of the Ecofin next Tuesday and ministers will have the final say on the proposal."

A naked sale is where the asset is not owned or borrowing arrangements not made at the time of sale.

A second diplomat said there is more than a qualified majority for ministers to vote through the measure as only the UK, Sweden and Germany raised issues.

The compromise backs a ban on naked government debt selling which could only be lifted temporarily if trading volume fell below a threshold to be agreed at a later date.

Investors such as hedge funds have been accused of speculating on falls in government bond prices, which exacerbated difficulties last year for Greece, which had to be bailed out by the EU and International Monetary Fund.

Parliament voted overwhelmingly in committee in March to go further and introduce a ban on naked selling of sovereign credit default swaps (CDS) as well as sovereign debt and shares.