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Europe postpones deadline for agreement on clearing house capital requirements

The European Commission has extended the deadline for agreement on harmonised rules for derivatives exchanges to 15 December 2015. 08 Jun 2015

The cost to EU banking groups of trading through US clearing houses was expected to rise on 15 June because of EU rules on banks' capital requirements,

Under rules introduced after the banking crisis EU banks must ensure they have capital to cover part of their exposure to derivatives trades transacted through clearing houses. That requirement is higher for trades routed through US clearing houses than through those in the EU or in countries whose rules, as regards clearing houses,  are treated by the EU as 'equivalent' to EU rules.

The EU Capital Requirements Regulation had set a transitional period until 15 June, during which the higher capital requirements will not apply. If an EU 'equivalence determination' had not been agreed by the deadline, however, the costs for European clearing firms to use US clearing houses would have increased.

This is the second extension to the deadline, which was initially 15 December 2014.

"The decision will give the market the legal certainty it needs for the next six months," said Jonathan Hill, the EU commissioner responsible for financial services and financial markets. "Meanwhile we are continuing to work hard on solving the underlying issues."