2 Financial services
| (32571)
7379/11
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| European Central Bank Opinion on a draft Regulation on short selling and certain aspects of credit default swaps
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| Legal base | —
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| Deposited in Parliament | 11 March 2011
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| Department | HM Treasury
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| Basis of consideration | EM of 30 March 2011
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| Previous Committee Report | None
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| To be discussed in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | For debate in European Committee B, together with a draft Regulation on short selling and certain aspects of credit default swaps already recommended for debate
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Background
2.1 In September 2010 the Commission proposed a Regulation to
introduce a number of permanent measures, as well as some temporary
ones to be used in adverse circumstances, in relation to short
selling of financial instruments. We have recommended that draft
Regulation for debate in European Committee B.[4]
2.2 In October 2010 the Council requested a formal
Opinion on the proposal from the European Central Bank (ECB).
The document
2.3 This Opinion is the ECB's response. In it the
Bank supports the objective of the proposals and recommends a
total of 11 amendments. The amendments cover:
- recital 6 — adding "an
officially appointed mechanism" for the disclosure of data
on short selling by the European Securities and Markets Authority
(ESMA);
- new recital 4a — citing the need for use
of consistent reporting formats for reporting and public disclosure;
- new recital 15a — citing the need for real-time
information sharing between competent authorities and the ESMA;
- recital 27 — extending the scope of consultation
between the ESMA and the European Systemic Risks Board (ESRB);
- Article 2.1(i) — making the definition
of "sovereign debt issuer" consistent with existing
EU secondary legislation;
- Article 9 — making reporting and disclosure
standards used in ESRB consultation consistent;
- Article 11 — setting out modalities of
information sharing in real time between competent authorities
and the ESMA;
- new Article 15.12 — provision for additional
regulatory technical standards to avoid abuses of the market maker
exemptions;
- new Article 15.13 — adoption of uniform
technical standards to provide for consistent application of the
stabilisation exemption in Article 15.4;
- new Article 23.2a — requiring the ESMA
to consult the ESRB before taking any measure under Article 23.1,
to allow incorporation of a macro-prudential perspective; and
- Article 24.4 — requiring the ESMA to allow
the ESRB 24 hours to respond to a consultation under Article 24.4
and to allow for incorporation of the macro-prudential perspective.
The Government's view
2.4 The Financial Secretary to the Treasury (Mr Mark
Hoban) says that:
- the ECB's Opinion requires
no action and therefore does not have any direct policy implications
for the UK;
- the ECB's proposed amendments have been made
in relation to the original draft Regulation published by the
Commission in September 2010; and
- in the intervening period a number of changes
have been made to the draft proposal and several of the ECB's
suggestions are now incorporated in the text.
2.5 The Minister then sets out the Government's views
on the individual amendments proposed by the ECB, saying that:
in relation to Recital 6, new Recital 14a, Recital
15a, Recital 27, Article 9, new Article 23.2(a) and Article 24.4
- "the Government supports
improved cooperation and information exchange between national
supervisory authorities, the European Supervisory Authorities
and the ESRB";
- in discussions in the Council Member States decided
that there was no need to be prescriptive in the methods of disclosure
to be used by the ESMA — Article 9 of the latest presidency
text requires competent authorities to publish information relating
to short positions on a central website and to communicate the
address of the site to the ESMA which must, in turn post a link
to all such sites on its own website;
- "the Government does not agree that there
is a need for further detail in the draft Regulation regarding
the format of reporting to be used by the ESMA";
in relation to Article 2.1(i)
- Article 2(1)(i) now has an
expanded definition of "sovereign issuer" which meets
the ECB's suggestion;
in relation to Article 11
- the Government supports improved
cooperation and information exchange between competent authorities
and the ESMA — Article 11 requires competent authorities
to share information with ESMA within seven calendar days and
the Government expects that there will be further discussion regarding
the modalities of information sharing;
in relation to new Articles 15.12 and 15.13
- the Government does not think
that it is necessary to provide for further technical standards
in relation to the exemptions set out in Article 15 of the draft
Regulation — any abuse of those exemptions can be dealt
with under the existing provisions; and
in relation to new Article 23.2(a) and Article
24.4
- the Government would not support
these suggestions as they would limit the ESMA's ability to respond
to a crisis with appropriate measures within 12 hours.
Conclusion
2.6 We recommend that this Opinion be debated
with the draft Regulation on short selling and certain aspects
of credit default swaps, already scheduled for debate in European
Committee B.
4 (31956) 13840/10: see HC 428-iv (2010-11), chapter
3 (20 October 2010), HC 428-ix (2010-11), chapter 8 (24 November
2010) and HC 428-xviii (2010-11), chapter 1 (2 March 2011). Back
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