FRANKFURT (Reuters) – The European Central Bank has launched a rare attack on EU governments for failing to give it ultimate oversight of clearing houses processing trillions of euros worth of securities.
Dominated by the London Stock Exchange, the clearing of financial contracts denominated in euros has become a political battleground since Britain voted to leave the European Union in 2016, with the bloc’s authorities vying to gain oversight of this key market on both sides of the Channel.
Under a provisional deal struck this month, EU governments and lawmakers gave the Paris-based European Securities and Markets Authority (ESMA) and national supervisors the final word in supervising central clearing counterparties (CCPs) based in the EU.
But the ECB said in a letter published late on Wednesday this undermined its ability to “monitor and assess risks posed by CCPs” and sought to block a change to its own rules that would force it to follow ESMA’s decisions on the matter.
“Under these amendments, the ECB would not enjoy regulatory powers in respect of CCPs established within the European Union,” ECB President Mario Draghi said in the letter to George Ciamba, chair of the EU’s General Affairs Council.
This body, which prepares the meetings of the European Council of EU government leaders, was expected to decide on the proposed changes next week.
If the ECB is successful in blocking the amendments to its statute, ESMA would still likely gain oversight of clearing houses but its decisions would not be binding on the ECB.
This would limit the ECB’s responsibility and possibly also leave the burden of providing liquidity to clearing houses in times of stress to the euro zone’s national central banks.
In the letter, also sent to the head of the EU’s parliament and other authorities, the ECB’s Governing Council withdrew its 2017 recommendation to change its statute with respect to clearing.
“One of the overarching objectives of the Recommendation cannot be fulfilled, namely, to ensure that the Eurosystem would have binding powers to monitor and assess risks posed by CCPs,” Draghi said in the letter.
The head of the European Parliament’s economic committee, Roberto Gualtieri, struck a sympathetic tone at a hearing on Thursday, blaming the European Council and Commission for failing to take on board the ECB’s concerns.
(Reporting by Francesco Canepa; Editing by Robin Pomeroy)