* ECB's Coeure sees big information gaps in swaps
* Global swaps dealers' role needs "controlling"
By Huw Jones
LONDON, Sept 11 The overhaul of financial
derivatives five years after Lehman Brothers collapsed is still
too patchy and risks an even more devastating crisis, a top
European central banker said on Wednesday.
The bank's demise in Sept. 2008 left regulators in the dark
over other banks' exposure to privately-traded derivatives
contracts like credit default swaps at the stricken lender.
This uncertainty froze markets and prompted world leaders to
require swaps to be recorded and pass through a clearing house,
which is backed by a default fund so that a trade is completed
even if one side of the deal goes bust.
Benoit Coeure of the European Central Bank's executive board
said differing privacy laws, blocking statutes and multiple
reporting venues means there is still no clear snapshot of the
$630 trillion over-the-counter (OTC) market for regulators.
"In fact, at the current stage, no authority has a complete
overview of the risks in OTC derivatives markets or is able to
examine the global network of OTC derivatives in depth," Coeure
said in a speech in Paris to assess progress on reforms.
The ECB becomes the main supervisor of top euro zone banks
from next year and has a role in supervising clearing houses.
Coeure said risks will not only become concentrated at
clearers but also at banks that act as a go-between for
derivatives customers and clearing houses.
This is because many customers won't have deep enough
pockets to deal directly with clearing houses as the requirement
to clear swaps is rolled out.
Swaps trading is mostly done by about 15 global banks such
as Goldman Sachs, Morgan Stanley, Deutsche Bank
It will be necessary to "control" the role of global dealers
within each clearing house to make sure the interests of end
users of derivatives are adequately heeded, Coeure said.
There has also been "virtually no progress" in global
cooperation among supervisors of clearing houses and waiting for
an emergency to inject urgency into task would be too late, as
the 2008-09 banking crisis showed, Coeure said.
"And the consequences in the case of central counterparties
would be even more devastating than what we have seen in the
banking sector," Coeure said.
The reforms agreed by the Group of 20 leading economies
(G20) had been scheduled to come into force by the end of 2012.
Differences over rules between the European Union and United
States, where most swaps are traded, have led to delays and
mandatory clearing of contracts will not come in until 2014 or
later in some cases.