The United Kingdom became the first European Union member state ever to take legal proceedings against the European Central Bank (ECB) with its Sept. 14 lawsuit challenging a proposed rule that would threaten London’s status as a trading center.
What’s more, the battle is taking place against the backdrop of political tension across the EU, as the European Parliament is on the verge of finalizing the European Market Infrastructure Regulation (EMIR), which sets clearing and reporting requirements for over-the-counter (OTC) derivatives trading. EMIR is part of a broader push, in response to the financial crisis and ensuing G20 agenda, to place EU financial services reform legislation on par with the U.S.’s Dodd-Frank Act.
In the ECB’s July 5 policy framework, the Central Bank explains that proper oversight of clearing and settlement systems is essential for the industry’s own proper functioning to preserve the general stability of financial systems.
It’s also impossible to view the U.K.-ECB clash without considering that the EU just issued a final draft of EMIR.