EU-based central clearing for CDS

EurActiv.com reports on an agreement reached among banks and brokers involved in the credit default swaps industry: Industry commits to central clearing for credit swaps. Excerpts:

Major banks and brokers involved in the credit default swaps industry committed yesterday (19 February) to use EU-based central clearing for their trades, bowing to pleas from regulators to lower the risks of this business which stands accused of worsening the ongoing financial crisis. ...

Credit default swaps are a particular type of credit derivatives aimed at guaranteeing a creditor against the risk of default or delays in getting back the credit. ... The idea of establishing a central clearing house is considered a moderate way to reduce systemic risks related to derivatives. Instead of being exchanged privately ("over the counter", according to the jargon), they will be processed through a third intermediary, which will decrease costs and risks while raising guarantees. ...

Following pressures from the Parliament and the Commission, the main firms active in the market of credit default swaps agreed to use central counterparty clearing for the "eligible" EU contracts by end-July. They confirmed their engagement with a letter sent to commissioner Charlie McCreevy responsible for the EU internal market. The signatories of the letter are Barclays Capital, Citigroup Global Markets, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan, Morgan Stanley and UBS, all members of the International Swaps and Derivatives Associations (ISDA). more...

The slightly discordant note in this piece of good news is that the agreement seems to refer only to European contracts -- which would contradict the stated intentions of Chancellor Angela Merkel. In Mehr internationale Regeln für Finanzmärkte (also here) she states:

Wir wollen sicherstellen, dass es in Zukunft keine weißen Flecken mehr auf der Landkarte unserer Welt gibt, wenn es um Finanzmarktprodukte geht, wenn es um die Teilnehmer des Marktes geht und wenn es um die Instrumente geht.