The International Swaps and Derivatives Association, Inc. (ISDA), today announced, that jointly with the European Central Bank (ECB)’s European Financial Markets Lawyers Group (EFMLG), it has submitted a letter to the European Commission, in which it proposes harmonization of netting laws across the European Union.
The proposal is for a European Union (EU) instrument on netting by way of either amending the EU Directive on Financial Collateral Arrangements or by drafting a separate directive and it is based on ISDA’s law reform work in Central and Eastern Europe (CEE) countries and across the EU.
European Central Bank President, Jean-Claude Trichet, endorsed the idea of EU-wide netting harmonization at ISDA’s 2007 Annual General Meeting in Boston.
In December 2006, the EU Commission in its evaluation of the implementation of Collateral Directive acknowledged the need to improve the EU legal framework with regard to netting and set-off.
One way of addressing the aforementioned suggestion would be to expand the scope of the Collateral Directive by adding substantive provisions on netting. Alternatively, an EU instrument on netting only could be considered.
On the global level of law reform beyond the EU, ISDA has expressed its support for the proposal on a Convention on Netting in Financial Services as made by International Institute for the Unification of Private Law (UNIDROIT).