EP resists lobbies pressures on CDS proposal.

After succeeding on March 7th in the marginalization of external pressure coming from the financial lobbies and groups of interest, a new challenge arises for the European Parliament on April 20th, when it will vote the proposed Over-The-Counter (OTC) derivatives regulation.

On January 20th and January 26th, eight MEPs coming from different countries and different political groups submitted amendments to the Commission’s proposal for ruling Credit Default Swaps (CDS). Such regulation appeared highly delicate as CDS represent one of the most problematic derivative products, highly speculative, and which have been recognized having a destabilizing role in the still ongoing Eurozone crisis. What appeared to be strange in the proposed modifications was that they were almost identical, or at least they had exactly the same outcome in legislation and/or the same explanation text (ten out of the fourteen amendments were identical and four almost identical).

It logically raised suspicion that the British MEP Syed Kamall – from the European Conservative and Reformist group – the Swedish MEP Olle Schmidt – Alliance of Liberals and Democrats for Europe – Markus Ferber, Burkhard Balz, Alfredo Pallone, Herbert Dorfmann and Corien Wortmann-Kool – from the European People’s Party – and Sharon Bowles – Liberal and chairman of Parliament’s economic affairs committee – had been heavily influenced from outside, presumably by lobbyists for the derivatives industry.

Confirming such considerations, the Corporate Europe Observatory (CEO), had received in at least two cases, texts written by financial lobby groups which were identical to the amendments tabled by the MEPs. Moreover, the amendments clearly aimed at undermining the attempt to introduce a basic regulation and transparency in the field of derivatives, furtherly weakening a text already lacking teeth (see all the amendments). In fact MEPs’ proposals opposed the efforts of the rapporteur, Pascal Canfin, to strengthen and tighten the regulation on credit default swaps. That included the banning of irresponsible practices of trading naked sovereign debt instruments and CDS – in opposition to what was proposed by the Federation of European Securities Exchanges and other lobby groups linked with the derivatives industry – or avoiding the delay in the introduction of sanctions against traders who fail to settle their payments – as proposed instead also by several financial lobbying group including the European Central Securities Depositories Association (ESCDA).

On March 7th, the European Parliament’s Economic Affairs Committee voted down the vast majority of the amendments inspired by the derivative industry. Part of the job was made by the compromise amendments submitted by the rapporteur Pascal Canfin, while lobbies totally failed opposing both the ban of CDS naked trading – as specific measures on sovereign debt instruments and CDS naked trading were introduced – and the introduction of sanctions against traders who fail to settle their payments.

Once more, on April 20th, the MEPs will have to demonstrate they vote for the citizens they represent, and not on behalf of the financial lobbies they are financed by.

Will MEPs vote for amendments written by the derivatives lobby? – Brussels Sunshine, March 3rd 2011
Industry inspired amendments defeated – Brussels Sunshine, March 14th 2011

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