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Subject: Concerns are mounting in the City of London that proposed European rules would stymie efforts to make Britain the principal offshore base for Chinese finance
Excerpt: English text from the archived bilingual edition · Chinese edition
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Concerns are mounting in the City of London that proposed European rules would stymie efforts to make Britain the principal offshore base for Chinese finance
Europe’s banking and markets watchdogs are set to present an updated version of draft standards on swaps trading by the end of this year
Banks are warning that they will be prevented from trading certain types
George Osborne, UK chancellor, has outlined measures to attract China’s offshore trading to London. Such ambition, however, are at risk as policymakers and banks wake up to the implications of the tougher derivatives rules
Traders and lawyers have warned that the standards, which will be phased in from September 2016, will leave banks facing insurmountable costs and potential legal complications in seeking to trade swaps with counterparties in China and other emerging markets
Under particular threat is London. The largest global hub for foreign exchange trading is also the biggest market for renminbi-denominated swaps outside Asia. The Chinese currency has entered the top 10 most actively traded currencies. “
“We understand it to be a real issue that could potentially cover any over-the-counter derivative contract — so swaps, forwards, options, whether interest, FX, credit equity or other. This is a big problem,” said Emma Dwyer, partner in the derivatives and structured finance group of Allen & Overy
Neither the European Commission nor Esma, the European Securities and Markets Authority, gave an immediate 20
The G20 group of economies has pushed for more swaps that are traded between two counterparties to be backed with more collateral, or insurance, for trading
However, the rules, which were crafted by the Basel Committee on Banking Supervision and the International Organisation of Securities Commissions in 2013, create problems when it comes to trading with some emerging markets, which do not meet standards for netting of exposure
The European Banking Authority and Esma, the pan-European regulator, are “well aware” of the issue and “will certainly propose a solution”, according to the EBA
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