Full text 
Procedure : 2010/0251(COD)
Document stages in plenary
Document selected : A7-0055/2011

Texts tabled :


Debates :

PV 04/07/2011 - 21
CRE 04/07/2011 - 21

Votes :

PV 05/07/2011 - 7.17
CRE 05/07/2011 - 7.17
Explanations of votes
Explanations of votes
PV 15/11/2011 - 7.10
CRE 15/11/2011 - 7.10
Explanations of votes
Explanations of votes

Texts adopted :


Monday, 4 July 2011 - Strasbourg OJ edition

21. Short selling and certain aspects of credit default swaps (debate)
Video of the speeches

  President. − The next item is the report by Mr Canfin, on behalf of the Committee on Economic and Monetary Affairs, on the proposal for a regulation on Short Selling and certain aspects of Credit Default Swaps (COM(2010)0482 – C7-0264/2010 – 2010/0251(COD)) (A7-0055/2011).


  Pascal Canfin, rapporteur. (FR) Mr President, Commissioner, ladies and gentlemen, as you know, this report concerns short selling and the supervision of credit default swaps, those products that insure debt against default, in particular state default.

The origins of this text lie in the Greek crisis, which began in spring 2010. Following certain movements on the financial markets that had been observed, a political request was put to Commissioner Barnier and to the European Commission to establish European rules on short selling and on sovereign debt speculation tools. The Commission drafted that regulation in September. This was followed by the adoption of our position in the Committee on Economic and Monetary Affairs in March, and of the Council position in May. Since then we have been negotiating, because we have already had five trialogues, which have enabled us to reach a number of possible compromises. Although they are not here, I should like to thank the representatives of the Hungarian Presidency who took part in these trialogues and helped to move this matter forward.

However, after those four or five negotiating sessions, we and the shadow rapporteurs who voted by a majority for this text in the Committee on Economic and Monetary Affairs – in other words, the Group of the Progressive Alliance of Socialists and Democrats in the European Parliament, the Group of the European People’s Party (Christian Democrats) and the Group of the Greens/European Free Alliance, which I represent – took the decision to vote in the July part-session for this text, but not for the legislative proposal, in order to send two messages. The first message consists in saying that we want to carry on negotiating with the Council because it has been almost a year since the Commission tabled this text and because, on this issue as on others, Parliament wishes to adopt a responsible yet ambitious attitude. We want these texts; we want the rules on financial markets to change. Too often, we have to wait for the Council, which clearly takes much longer to make its decisions than we do. Therefore, we want to carry on negotiating, which means that we will not be voting for the legislative proposal tomorrow.

However, we also want to send three messages on the substance in order to reaffirm the positions adopted in the Committee on Economic and Monetary Affairs, which will become the positions of the European Parliament too when it adopts them – by a very large majority, I think – tomorrow.

The first issue concerns the role of the European Securities and Markets Authority (ESMA). In our version we have strengthened the role of ESMA, and you have reminded us many times, Commissioner, of the importance of that institution when it comes to ensuring the consistency of the single-market rules on financial services. I have to say that the position adopted in the Council – to have a red line that is an absolute red line for us, to create a right of veto for States on European regulatory issues concerning sovereign debt – is completely unacceptable.

The second point that I wished to raise is that we in Parliament want a simple rule: when you sell an asset, be it a share or a bond, you must be able to know for certain where to find it; there must be an agreement with the person who is going to lend it to you. This is what is known as the ‘hard locate’ rule in technical speak. This is Parliament’s position, and I think it is a sensible one.

The final point that I should like to emphasise, and which is obviously a key element of the discussions we are having, is the ban on naked credit default swaps. This position is shared by a large majority of the European Parliament. We do not see how it is possible, in financial terms, to cover oneself against a risk with a credit default swap without being liable for that risk, in other words without owning the bond of the country that issued the security. It is a nonsense and it opens the door to speculation.

To conclude, I would say that the current debates on Greece prove us right, because some of the arguments made to limit the Greek restructuring consist in saying, ‘Yes, but some people have speculated. If the debt is restructured, they are going to make money without having invested in Greece.’ That is exactly what we want to put a stop to.



  Michel Barnier, Member of the Commission. (FR) Mr President, as Mr Canfin said, with each day that passes, if we look closely at what is happening on the markets, we are reminded of the urgent and topical nature of this text. That is why, Mr Canfin, my entire Directorate-General and my team have worked so quickly, I think, and so seriously in four and a half months; on 15 September it will be a year since we tabled this text. I see the time passing, we know that times passes much more quickly in the world of the markets than in the world of democracy, and that is why I hope, like you, that you will be able to follow up the good work that you have done with the Hungarian Presidency recently in order to find a solution and to reach some compromises.

Ladies and gentlemen, the 2008 financial crisis and the stock-market collapse that followed clearly illustrated the consequences and the risks that can result from uncontrolled movements on the financial markets, which are sometimes encouraged by a number of reprehensible practices that we must regulate. The 2009 bond crisis highlighted the fact that these phenomena can affect bond markets too by causing serious problems for everyone operating on them, including Member States when they try to raise capital.

In both cases, the Member States reacted urgently, and often in a disorderly fashion, without having the information and the resources necessary to act effectively and within a genuinely European framework.

The draft regulation on short selling and credit default swaps (CDS) is specifically aimed at remedying this situation. We want to make these practices more transparent. Although they are often useful, they can have an impact on the markets by increasing volatility. The regulation must enable national regulators to act effectively, within the comprehensive and coordinated European framework that we want to consolidate.

Faced with markets that are still unstable and with the persistent problems concerning the debt of certain Member States, Europe must take swift action, and it must take practical action.

It is vital that the European Parliament, the Council and the Commission can make progress on reaching a dynamic compromise, something which you yourself want, Mr Canfin, and the few weeks that you are going to have should make this possible. I am very grateful to you, Mr Canfin, for the very effective work you have done alongside and with the shadow rapporteurs, Mr Ferber, Mr Goebbels, Mr Schmidt and Mr Kamall, and the Presidency, which has supported these efforts, as you said yourself.

The text put to the vote in Parliament and the general Council agreement are aligned on many points now. I think that the trialogues have made this alignment process possible, and I hope that it will succeed.

I would just like to raise three points in your presence: the purchase of naked CDSs, the restrictions on naked short selling, and the powers of the European Securities and Markets Authority (ESMA), which you yourself mentioned, Mr Canfin.

Point one: regarding the sensitive issue of CDSs on sovereign risks and the possibility of buying them without being exposed to the underlying risk, therefore naked, I believe that appropriate action should be taken. I have reservations, as you know, about the effects of an unconditional ban on naked CDSs where the liquidity of sovereign markets is concerned and about the impact that that might have on the bond market. I think that we need to change the status quo and not leave it up to the Member States to decide whether or not to ban naked CDSs. We must not let this opportunity slip; that is why I can confirm to you that we are willing to work with the European Parliament and with the Council in order to come up with a solution that responds to these concerns, which are in fact legitimate.

Point two: regarding the restrictions on short selling and the ‘locate rule’, which you mentioned, we must maintain effective and sufficiently binding measures for market operators. Having different provisions for shares and sovereign debt may be an option, Mr Canfin, but this must not result in requirements that are too flexible and hence ineffective.

Point three: regarding ESMA’s powers, it is very important for that authority – I shall say it again in relation to this text – to be able to carry out its coordination and, in some cases, intervention role; this was a requirement laid down in ESMA’s founding regulation, which you yourselves consolidated, and this regulation officially authorises such intervention under certain circumstances. The issues relating to sovereign debt are, of course, particularly important for the Member States. We can see this very clearly at the present time, but maintaining a European regulatory framework that dovetails with an authority that can act effectively is also very important. I made a promise, during the recent ECOFIN Council in May, to work with you and with the Council on an appropriate solution.

Once again, I am very grateful to you for having properly understood and worked on this text, which I consider to be one of the bricks that we talked about earlier, and for having decided to take the few days or weeks necessary to work effectively on the trialogues and to bring them to a successful conclusion.


  Klaus-Heiner Lehne, rapporteur for the opinion of the Committee on Legal Affairs.(DE) Mr President, Commissioner, ladies and gentlemen, what we have here is a very important proposal and a very important report. In my view, the very fact that we are having this debate demonstrates that in the past we allowed things to go on in the financial markets that had, in fact, been banned in casinos and state lotteries for years or even decades.

The rapporteur has rightly pointed out that, in the current situation, credit default swaps (CDSs) are being offered which insure something that may not even exist. In practice, the result – and this is also true in the current debate on the crisis in Greece – is that nobody knows how many CDSs actually exist, or what the consequences would be in the event that Greece should actually declare itself bankrupt. It is high time that we regulated this and ensured proper supervision. In so doing we can help draw up rules for the financial markets that are at least equal to those that apply when ordinary citizens visit a casino or play the lottery.


  Markus Ferber, on behalf of the PPE Group.(DE) Mr President, Commissioner, ladies and gentlemen, it is right for us to debate this important proposal from the Commission here in plenary today and for us to lay down our position as the European Parliament tomorrow, because discussions in recent weeks – with all respect to the Hungarian Presidency, which has tried very hard to bring the Council and Parliament closer together on this – have shown that the Council of Ministers still needs to be motivated into adopting rules that allow what is necessary, but which prohibit what is not necessary.

Let me say quite plainly that I can hardly stand to hear the word liquidity any more. If there was one problem that was to blame for leading us into the financial crisis, it was that there was too much liquidity that was invested in products that nobody needs and which then collapsed and took us into the crisis. I ask you therefore: who is it that needs insurance against a government defaulting on its commitments? Only those that hold such government securities, and they should indeed have it. Anyone speculating on a country being unable to meet its commitments, however, should not be able to use such instruments to do so. That is why these products must be prohibited.

When it comes to the short selling of shares – in other words, selling shares that one does not have – it is a matter of drawing up rules that prevent highly speculative behaviour. I believe we have achieved a reasonable compromise here, and in this respect discussions with the Council have been very constructive. I would like to thank the rapporteur for his outstanding work. I would also like to thank the shadow rapporteurs for their constructive discussions, and also the Commission, which has played a very positive part in achieving this. Moreover, I hope that, for its part, the Council – which is unfortunately not represented here today – will be able to agree a sensible resolution of this matter with us as soon as possible. With that in mind, I am pleased that we – as Parliament – are now sending out a clear signal as regards this important dossier.


  Robert Goebbels, on behalf of the S&D Group.(FR) Mr President, I fully agree with my fellow Members Mr Canfin, Mr Lehne and Mr Ferber, because I believe that in order to prevent a new financial crisis, we need to strengthen market regulation. In particular, we need to ban all abusive practices, one particularly harmful example of which is short selling. Bear Stearns and Lehman Brothers were forced into bankruptcy by the short selling of the shares of those two paragons of Wall Street capitalism. Naked credit default swaps (CDSs) are more abusive still. Warren Buffett described them as weapons of mass destruction. In theory, a CDS is a guarantee against a possible loss on a security. Yet naked CDSs offer the possibility of insuring oneself against a risk for which one is not liable. That is toxic speculation and it endangers the real economy.

Today, certain market operators are betting on the collapse of the euro area and on the default of a State. By purchasing naked CDSs on the sovereign debt of certain States, they are simply increasing the speculative pressure on the States concerned. It is strange that certain States – the United Kingdom, Italy, Spain, Romania and others – do not want naked CDSs on sovereign debt to be banned. They believe in the warnings from the markets predicting increased volatility on the sovereign debt market if naked CDSs are banned. Those governments should explain to their citizens that they prefer to give in to wild speculation rather than alienate the sacrosanct financial markets. Wolfgang Münchau, an editorial writer on the Financial Times, who is far from left-wing, writes the following:

I quote in English: ‘A naked CDS purchase means that you take out insurance on bonds without actually owning them. It is a purely speculative gamble. There is not one social or economic benefit. Even hardened speculators agree on this point. Especially because naked CDSs constitute a large part of all CDS transactions, the case for banning them is about as a strong as that for banning bank robberies.

‘Economically, CDSs are insurance ... A universally accepted aspect of insurance regulation is that you can only insure what you actually own. Insurance is not meant as a gamble, but an instrument to allow the buyer to reduce incalculable risks. Not even the most libertarian extremist would accept that you could take out insurance on your neighbour’s house or the life of your boss.’

Therefore it is absolutely necessary that we reach an agreement with the Council, especially on banning naked CDSs.


  Olle Schmidt, on behalf of the ALDE Group.(SV) Mr President, Commissioner, I would like to start by thanking the rapporteur, Mr Canfin, for a splendid piece of work and, above all, for the way in which he led the trialogue negotiations. It was an absolute pleasure, even if we did not entirely agree.

We need a European legislative framework for short selling. I believe that that is something on which we all agree. We need more transparency and openness. It must no longer be possible for anything to be conducted in secrecy. We need a greater ability to regulate and we also need a greater ability to regulate at European level through the agency of the European Securities and Markets Authority (ESMA). However – and I realise that I am saying something that will not go down well in this Chamber – it is important for the financial markets to have the option of short selling. That will actually provide liquidity on the market and reveal prices that have been incorrectly set as well as any share bubbles.

The controversial question is now whether the EU should introduce a ban on short selling of naked credit default swaps. In connection with the crisis in Greece, it has been claimed that market participants have used these credit default swaps to a considerable extent to speculate against the Greek crisis. The Commission’s report issued last year demonstrated that this was not the case. It simply did not happen. Neither is there any evidence, Mr Ferber, to suggest that the German ban during the financial crisis had the desired effect. On the contrary, academic experts believe that it had a negative effect. Our basic approach should be not to introduce market restrictions if we do not know what will happen.

My view and that of my group – and it is in line with what Mr Lehne and the Commissioner said – is that to experiment with a ban at the present time could be detrimental. The burden of proof should be on those who intend to introduce this ban. My group and I are in favour of the regulators being able, in exceptional circumstances, to introduce a temporary ban or to restrict short selling if manipulation of the market or other phenomena occur. However, a permanent ban at this present time would make the market, which is already experiencing uncertainty, even more uncertain.

The speaker agreed to take a blue-card question under Rule 149(8))


  Sven Giegold (Verts/ALE). – Mr President, I have a very short question. Could Mr Schmidt explain to me what economic benefit naked short selling brings to an efficient financial market? From my perspective, there is no theoretical reason in economic theory to explain what it is good for.


  Olle Schmidt (ALDE). – Mr President, I would rather use my mother tongue, but OK. Mr Giegold, I tried to explain that in Swedish and I think the burden of proof is upon you to say why you should ban naked CDSs today, because exactly as the Commissioner said, there is turmoil out there in the market. We do not know what is going to happen – that is also what Mr Lehne said. This is the crucial issue now: you do not know what is going to happen, I do not know what is going to happen, therefore be cautious, my dear friend Sven Giegold, be cautious. We are not dealing with theories now. We are dealing with a dramatic economic situation in Europe today, so you have a responsibility to know what kind of proposals you are passing through this House.


  Syed Kamall, on behalf of the ECR Group. – Mr President, I would like to thank the rapporteur and the shadow rapporteurs for the work that we have done, even though we may not agree on every element.

One of the things that we do agree on is the need for better coordination between regulators and supervisors across borders so that they can act quickly. We all agree on the need for greater transparency. We can also agree that, where there is abusive behaviour in short selling, that should be banned. But that is banned under the Market Abuse Directive, so we have to be clear about what we are trying to achieve with this directive.

The question has been raised about uncovered sovereign CDSs. When I talk to the participants in the market I ask them why they want to use uncovered sovereign CDSs. Some of the investment banks tell me that they need them if they provide credit lines to some small and second-tier banks. I have also heard from investors – and I have shared this with my colleagues, but they did not seem to want to listen – that, if you have investments in countries that you are concerned about and you cannot get protection on those investments, you use uncovered sovereign CDSs as a proxy hedge for those investments, in such sectors as infrastructure, shopping malls and others. That is why they are used.

The problem is that, if we ban this, what will we end up with? We will end up with more complicated and less transparent instruments, when we want transparency. We will also end up not actually recognising the real problem. The real problem with CDSs and other derivatives is how they are treated on the balance sheets of banks and how banks use them to falsify their accounts, liquidity and capital.

Let us focus on the real problem here, rather than trying to ban everything without tackling the real problem. Let us tackle the real problem of transparency, IFRS standards and the way these instruments are dealt with by banks.


  Thomas Händel, on behalf of the GUE/NGL Group.(DE) Mr President, ladies and gentlemen, speculation was a major factor in triggering the crisis, while credit default swaps (CDSs) and short selling have been a major factor in heightening the crisis. These instruments have degenerated into purely speculative instruments. Some people in the financial sector seem to have incorrectly regarded or misused these instruments as a personal licence to print money. As a result, entire economies have suffered, along with nation states and, above all, the people of the countries concerned. To this extent, the fact that the Commission has finally taken the initiative and realised that regulation is necessary is to be welcomed. Whether or not the regulation will be strict remains to be seen.

I expressly welcome the work and the efforts by the rapporteur, Mr Canfin, to improve the regulation tabled and to put a stop to the gambling. What is needed is a de facto ban on naked short selling and the prevention of speculation in the future. We also need strict regulation and, above all, a strong supervisory authority in Europe.

I fear, however, that as the negotiations continue, the interests of the financial centres – London and Frankfurt in particular – will override the interests of the majority of the people of Europe. If that happens we will be left with little more than a Swiss cheese in which the holes are probably larger than what is left. That is quite definitely not something my group could support.


  Dimitar Stoyanov (NI).(BG) Mr President, to be able to control the various derivative instruments properly, you need to have people who have an excellent knowledge of them. However, ladies and gentlemen, where would anyone with such good knowledge go? To the European inspection agency where they will receive an annual salary of EUR 30-40 000, or will they become a broker on the stock exchange where they can earn millions from speculation?

This method of getting rich by using speculation and knowledge about how the system works has been known for two thousand years, ladies and gentlemen, as oligarchy. As a result of the games being played by the new financial oligarchy, Europe’s citizens, the very ordinary, poorest people, are now paying the price due to the fact that this oligarchy was left to its fun and games. This is why, in order to stop this act of robbery against European citizens, Commissioner, it is not just necessary but compulsory to ban uncovered short selling and credit swaps.

(The speaker agreed to take a blue-card question under Rule 149(8))


  Franz Obermayr (NI).(DE) Mr President, my question is addressed to the previous speaker. Yes, we should come to an agreement with the Council. That is all very laudable. I should be interested to hear how the previous speaker sees the situation. In his view, is the Council dragging its feet and not sufficiently prepared to be transparent? In particular, I should be interested to know what role the national governments should play – an important role or a fairly insignificant one? Moreover, what is his assessment of the function and task of the European Securities and Markets Authority (ESMA)?


  Dimitar Stoyanov (NI).(BG) Mr President, thank you, Mr Obermayr. I think that the answer to your question is very simple. When we see the Council dragging its feet and doing nothing for more than a year, I cannot understand the Commission’s position. Why should Member States be banned from taking measures themselves? When one State is under threat, it cannot expect the Council made up of all the States to be on hand to make a decision, assuming that it does not want to. This is why I think that Member States must be given the power to ban these instruments in this situation.

As far as the role of the European Securities and Markets Authority (ESMA) is concerned, I agree that it is exceptionally important. However, as I said at the start of my speech, I cannot simply imagine how staff, who should exercise real control, will be recruited for this agency.


  Sławomir Witold Nitras (PPE). (PL) Mr President, I would like to congratulate the rapporteur and the shadow rapporteurs. Let me make a few comments based on the debate.

Some of you may think this is trivial, but I would like to remind you that falls on the stock markets during the crisis were a consequence and not a cause of the problems. The reasons for these dramatic falls were the excessive risks taken by market participants, and the falls were a reaction to the losses they incurred. Sometimes, after all, prices have to fall to reflect the true value of a share or bond or other instrument. What is important is that these falls do not lead to panic or excessive hesitation. This is why the regulation is so important. In my view it addresses the challenge, and this is why I am pleased, as a situation where a supervisory agency is in possession of the full facts on short selling is an eminently desirable situation. It will increase the quality of supervision and confidence in this type of institution. However, I am not fully convinced whether making this information public will also contribute to this. I hope that it does not have consequences which are very different from those expected, such as the knowledge that a certain amount of short selling is taking place which may lead investors to tend to pursue that very trend.

Regarding credit default swaps (CDSs), I am not convinced that banning uncovered CDS transactions is a proper reaction to what has happened to Greek bonds. There is no convincing proof, or at least I am not aware of any, that CDSs caused greater hesitation or increased interest rates on bonds of endangered countries. Please remember that the markets for CDS contracts are many times smaller than the bond markets of countries on which they are based. This is why it is difficult to believe that this issue has had such an effect. Even in spite of that I could agree that the ban is justified, were it not for the fact that – as Mr Kamall mentioned, among others – empty CDSs in fact cover other transactions which have not been included.


  Wolf Klinz (ALDE).(DE) Mr President, ladies and gentlemen, we do not know precisely what role short selling or naked short selling played in the bankruptcies of Merrill Lynch and Lehman Brothers, but we do know that they made at least a substantial contribution to the collapse of these institutions.

Claiming that naked short selling is useful for the market is as hard to prove as saying that it will be the end of the world if we do not prohibit it. We are dealing here with a highly complex, extremely technical area and I would not dare to claim that one thing or another was definitely right. However, it seems to me absurd to want to sell something that you do not even have, and moreover to want to do this on a speculative basis. It goes against my basic understanding of how one should behave in business. If I do not have the title to something then it is difficult for me to offer it for sale. Whether this is genuinely useful for the market is something that I am not in a position to judge. Perhaps it is – but my instinct suggests it is not.

I would therefore suggest that we should deal with it by saying that shares, debt instruments and credit default swaps (CDSs) can only be offered for sale if you either hold the title or – if you do not hold the title – a loan agreement has been concluded or at least an agreement that says that the title will be available the next day or in a certain number of days’ time if the transaction is actually concluded and settled, so that no risk arises. I thought that the Council and Parliament had already agreed on this when they agreed the intraday rule. I regret to say that the Council has since moved away from this position, and I hope that it may find its way back to it.

One thing is certain: in the final event, these are international transactions and it is therefore important for us to have very clear supervisory rules. It seems to me that the recently established European Securities and Markets Authority (ESMA) is the ideal institution to have a sole mandate to intervene in serious cases and to establish what needs to be prohibited, what needs at least to be recorded, where we need a repository, where we need a reporting requirement and so on. In this respect we have an ideal opportunity to use ESMA productively.


  Elena Băsescu (PPE).(RO) Mr President, I too must welcome the Commission’s initiative on creating a legal framework for short selling and credit default swaps (CDSs) regarding the situations where market operations would pose a threat to financial stability or market confidence. I agree with the proposal to introduce a transparency system which entails the relevant authorities being notified of significant net short positions in shares, according to specific thresholds. In normal circumstances, short selling is conducive to market liquidity and helps set prices effectively. However, when the markets are experiencing difficulties, this operation can exacerbate the fall in prices. This situation would result in turbulent markets and systemic risks.

Regulatory bodies must be given clear-cut powers to restrict or ban short selling in exceptional circumstances. They will be exercised in cooperation with the European Securities and Markets Authority (ESMA).


  Monika Flašíková Beňová (S&D).(SK) Mr President, much like today’s debate on derivatives, this debate on short selling and credit default swaps is important if we are to maintain already fragile financial stability. The fact that these provisions take the form of a regulation is unavoidable, as they impose direct obligations on private parties to disclose information. Transparency is particularly important for financial market stability and investor protection.

Another significant point in this proposal is the suggested ban on naked short selling. The current debt crisis has shown how speculators who choose to gamble on the bonds of eurozone Member States rather than actually own them are capable of bringing entire countries to their knees, so it is vital to restrict the practice of using credit defaults swaps as cover for securities solely to the bond holders.

The final important point promoted by the text before us is the strengthening of ESMA’s powers. I hope that the Council will review its position that decision-making in exceptional situations should be placed in the hands of finance ministers rather than ESMA, and that ESMA will take precedence in this regard.


  Franz Obermayr (NI).(DE) Mr President, I am glad to have the opportunity to add a few critical remarks. In short selling one is selling a security that one does not have, or that one has merely borrowed. This enables speculators to bet on falling prices. These complex, opaque instruments were the deciding factor in bringing about the financial crisis. We therefore need a basic ban on speculative short selling of forward contracts. However, this ban needs to be comprehensive and must also include naked credit default swaps (CDSs) and short selling, particularly of government bonds. Betting on states being unable to meet their commitments in times of crisis is abominable, and we need to stem the tide of destructive speculation involving government bonds. Finally, we also need to bolster our mechanisms for sanctions in the financial services sector. The crisis involving the euro should have shown us one thing at least: not every financial transaction that is profitable in the short term is economically and ethically justifiable.


  Jean-Paul Gauzès (PPE).(FR) Mr President, having listened to this debate as a layman, I think that we need to show some common sense in this affair. When crises occur, the citizens are the ones who directly or indirectly pay the consequences. I believe that when they realise the absurdity of selling something that one does not own, or of insuring against a risk for which one is not liable, they understand that this is an inappropriate system.

I believe that we should try today to apply some common sense to this complex financial legislation, so that the human spirit is back at the heart of this work, instead of computer programs that are all configured in the same way to ensure that, when ridiculous transactions take place, no one really understands what is going on. I believe that Parliament has adopted some reasonable positions, and I hope that the Council will support them.


  Evelyn Regner (S&D).(DE) Mr President, Commissioner Barnier, in your introduction you said how important it is to make dynamic progress on this matter. That is a view I share, but at the same time I cannot help but remember that we Members already include a passage aimed at prohibiting naked short selling in the dossier on alternative investment fund managers. It did not have the intended effect. A separate proposal was tabled.

I originally drafted the opinion of the Committee on Legal Affairs on this matter, but I subsequently had my name removed because, in my view, we should not be making compromises here. We need a rigorous ban on naked short selling. Credit default swaps for government bonds should be prohibited. In this regard I can only congratulate the Committee on Economic and Monetary Affairs, which was able to achieve something constructive in the later work, for having succeeded to some extent and hope that in the end the Member States will be a bit more reasonable.


  Michel Barnier, Member of the Commission. (FR) Mr President, Mrs Regner, I have not forgotten the promise that was made during the debate – which Mr Gauzès and all of you here remember – on the Directive on Alternative Investment Fund Managers.

It is precisely for that reason that, as I said earlier in response to the work done by Mr Canfin – which many of you unanimously praised, and rightly so – the Commission honoured its commitment by preparing, in the space of four and a half months, the text that it presented almost a year ago – it will be a year to the day on 15 September – to the bodies in charge of making a decision: Parliament, which you represent and comprise, and the Council.

I should like to thank Mr Lehne, Mr Schmidt, Mr Händel and Mrs Flašíková Beňová for agreeing that we need to regulate credit default swaps (CDSs) and to increase transparency and financial stability. Mr Gauzès spoke about the citizens. The citizens are also taxpayers. As I have often said, they cannot afford a second crisis and, politically speaking, they will not accept another crisis without lessons being learnt from the current one, which has been going on now for more than three years and is still not over. We owe it to the citizens, particularly to those who live in countries that are being attacked on the markets, Mr Gauzès, and which are suffering under the effects of volatility, speculation and hyper-speculation, which Mr Stoyanov was not the only one to denounce here.

That is why the Commission has proposed rules, transparency and accountability, but needless to say it is willing to carry on and accomplish even more work with Parliament.

Mr Ferber, to whom I listened, as always, very carefully, raised the issue of liquidity. Let me say it again: I want to be cautious and realistic with you. Mr Schmidt also raised this point, as did Mrs Bǎsescu. We know what an important role liquidity plays in ensuring the smooth functioning of the debt market. That is why I expressed reservations about a straightforward ban. However, I am always willing to discuss progress of any kind, and any additional rules that could provide peace of mind, Mr Ferber.

Mr Goebbels was right in saying that short selling can be harmful. However, it can also be useful, which is why we did not hesitate to implement a framework and rules. I agree with you, Mr Goebbels, holding CDSs without being exposed to the underlying risks does present problems, and sensitive ones at that. Mr Kamall also mentioned the sensitive nature of this issue. This is one of the issues that we will have to address in the trialogue.

All in all, though, ladies and gentlemen, thanks to you and with you, we are going to create for the first time, if you and the Council so wish, a European framework on the CDS market, with a European authority which I hope will not be undermined, on this or any other issue, and I am keen for it to be able to use ESMA’s Article 9 – which Mr Giegold knows well – which gives it important powers.

A word about naked short selling, which concerns me just as much as it concerns you. Mr Klinz and Mrs Regner raised this point. In this text we are going to propose – and I hope we can see it through – two types of regulation, everyday regulation in the shape of the ‘locate rule’, which your rapporteur, Mr Canfin, mentioned, and then a coherent liability system with a buy-back obligation. We will therefore have binding everyday rules for everyone and then the ability to enforce a coordinated ban, which we all wanted, in the event of an emergency.

One final word, Mr Nitras, on the disclosure of information. We have made provision to disclose information on shares above a certain threshold. Moreover, if I am not mistaken, that is precisely what the regulators wanted and requested. In the case of sovereign debt, this disclosure will not be automatic, but it will be compulsory to provide information to those regulators who need it.

That is what I am able to say, Mr President, by way of thanks to the rapporteur and to the speakers, and to clarify a number of points before you – we – spend the next few weeks, I hope, reaching a dynamic agreement on this point.


  Pascal Canfin, rapporteur. (FR) Mr President, I just wanted to say something to my fellow Member, Mr Kamall − since he is one of the negotiators of this text and is very familiar with it, and if he is not, he only has to read it – concerning his argument that credit default swaps (CDSs) are used as proxy hedges and therefore should not be banned. As the text says, when CDSs are used for proxy hedging, they are not uncovered. It would be helpful, therefore, if you could change your argument or read the text, because we are debating for nothing otherwise.


The second point that I wished to make is that we really want to complete this text because we feel that the situation is urgent. No one is saying that CDSs caused the Greek crisis. It would be absurd to think that. However, they are clearly being used to fan the flames by financial operators whose sole aim is to exacerbate the crisis so that they can make money at some point.

While we are on the subject of CDSs, I should like to tell you that this text only covers the purchase of these swaps. This presents another problem, which was also raised by Mr Kamall, concerning the fact that operators who sell CDSs, such as US banks and hedge funds, are supposed to provide a guarantee against the risk of default to banks such as BNP, Deutsche Bank and Barclays. For those banks, it is a way of getting the risk off their balance sheets. However, those who sell CDSs, such as hedge funds, have a lot less capital than the banks. This tool has the effect of reducing capital requirements and hence the security of the system.

Since you are working on the Capital Requirements Directive 4, I should like it if you could also cover the sale of CDSs and the obligations incumbent on sellers of CDSs, rather than just focusing on buyers, as is the case in this text.


  President. − The debate is closed.

The vote will take place on Tuesday, 5 July 2011.



Written statements (Rule 149)


  Sebastian Valentin Bodu (PPE), in writing.(RO) Unlike long selling, where the risk is reduced to the difference in price between buying and reselling, the risk with short selling is unlimited, which means, in theory, that losses could be limitless. Taking into account the unlimited risks which a seller also assumes in short selling, it was considered necessary to adopt this regulation. However, certain notification periods or procedures may have slightly more relaxed deadlines. Furthermore, speculative transactions, along with hedging transactions, are an integral part of this market and must be declared to the European Securities and Markets Authority (ESMA). Speculative transactions are not damaging in themselves; the danger lies in them getting out of control.


  Edward Scicluna (S&D), in writing. – Restrictions on short selling and credit default swaps in exceptional situations have long been overdue, as is the need for more transparency from financial markets. Parliament rightly found it appropriate to have a common framework rather than to rely on a number of divergent measures by Member States, as experienced during the financial crisis three years ago. These obligations come in the wake of various other reforms to past regulatory regimes. It is easy to jump on the bandwagon at this time and argue that more regulation is better because we do not want to live through another crisis in our lifetime. But at the same time we all want to look forward to a future where industry, both manufacturing and services, provides much-needed jobs, based on strong economic growth. For this we need many bankable projects. Let us therefore satisfy ourselves that there is no unintended collateral damage to industry from financial regulation. We do not want EU project funding to be curtailed by a drought of liquidity, nor do we want their responsibility in mitigating risks to become prohibitively expensive so as to make them lose their competitiveness.

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