US regulators are demanding the right to probe books, records and emails at the headquarters of Europe's biggest financial groups, prompting deep EU unease over Washington intruding on its patch to collect highly sensitive data.
The behind-the-scenes dispute over investigative powers to police complex markets has taken on new significance in the wake of US spying revelations, which have amplified European fears about the US.
The US access demands will create a test of political will over the coming months as the transatlantic authorities mark out regulatory turf in enforcing the slew of post-2008 crisis rules designed to reduce international financial risks to domestic taxpayers.
Senior EU and US officials have been working on ground rules for conducting cross- border data requests and finding solutions to the legal impediments in some countries to reporting derivatives trades.
Derivatives dealers
Yet according to those involved, the Securities Exchange Commission and Commodity Futures Trading Commission are unwilling at any stage to cede the right to obtain, where necessary, material directly from overseas derivatives dealers or hedge funds that register in the US.
Instead of relying on home regulators to collect data, this means US authorities could demand unrestricted access to internal messages and trading books at Barclays in London, Deutsche Bank in Frankfurt and Société Générale in Paris.
Data access is one of the most contentious elements as the EU and US work towards the smooth implementation of a political accord to eventually divide up enforcement responsibilities on the $633 trillion global over-the- counter derivatives market.
Europe is worried that allowing access to details of thousands of trades conducted between banks and large corporations could breach data protection laws, or be used by the US for commercial advantage.
Scott O’Malia, a CFTC commissioner, said that the issue of access to data was “a great litmus test” on whether the EU and US eventually recognised their respective rules were in effect one and the same. – (Copyright The Financial Times Limited 2013)
