EU regulators plan central warehouse for credit contracts

Brussels: European Union regulators are planning to store copies of credit default swap contracts in a central warehouse, as part of efforts to make the market safer, a top market regulator said on Friday.

Eddy Wymeersch, chairman of the Committee of European Securities Regulators, the pan-EU watchdog group, said the proposal ties in with a commitment by dealers to centrally clear their European contracts in the EU from the end of July.

"We would end up having more insight in that part of the market which we do not have today," said Wymeersch.

The G20 summit in Washington last year agreed there should be central clearing of credit default swap contracts to cut risk in a market that grew in just a decade to $60 trillion (Dh220.4 trillion) in notional outstanding value by the start of last year. The aim is to make markets safer and more transparent.

The DTCC already operates a warehouse in the United States which keeps "golden copies" in digital form of credit default swap contracts.

It was part of industry efforts to compress the outstanding value of the contracts to $27 trillion in the DTCC warehouse by January this year, representing about 90 per cent of the global market.

Wymeersch said work was continuing on defining "characteristics" of a European warehouse. "We will go, after a time, to contract it out to the private sector. We will not do it ourselves as it's not our business," Wymeersch said.