EU, U.S. Reach Deal on Derivatives Oversight

BRUSSELS—Regulators in Washington and Brussels have struck a deal advancing a central component of post-financial-crisis efforts to coordinate on international rules for derivatives, which played a central role in the 2008 meltdown.

The deal between the Commodity Futures Trading Commission and the European Commission, the European Union's executive arm, revolves around the regulation of clearinghouses—entities that are supposed to help prevent a marketwide collapse by ensuring either party in a derivatives transaction would get paid if the other side falters.

Under the agreement, announced early Wednesday, European policy makers will agree to bless U.S. clearing regulations as "equivalent" to their own, ending an impasse that had lasted at least two years and complicated efforts to establish a system of oversight for the multi-trillion-dollar derivatives market that is "largely equivalent" across borders.

"This is an important step forward for global regulatory convergence," said Jonathan Hill, the EU's financial-services chief.

Mr. Hill said the deal means European central counterparty clearinghouses, or CCPs, will be able to do business in the U.S. more easily and that U.S. CCPs can continue to provide services to EU companies.

The deal is a win for U.S. entities like CME Group Inc. and Intercontinental Exchange Inc. Without the "equivalence" blessing, European banks that choose to clear their trades in the U.S. would have faced steep capital charges, which industry officials said would have been unduly costly.

Derivatives, including swaps, are used by firms to hedge or speculate on everything from moves in interest rates to the cost of fuel.

"Our agreement is critical to ensuring that our global derivatives markets remain robust, while keeping our financial system as stable and resilient as possible," said CFTC Chairman Timothy Massad.

Write to Viktoria Dendrinou at [e-mail] and Andrew Ackerman at [e-mail]

(END) Dow Jones Newswires

February 10, 2016 10:25 ET (15:25 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.