Statement of Commissioner Dan M. Berkovitz on Final Rule Excluding the European Stability Mechanism from the Definition of Financial End User

April 14, 2020

I support today’s final rule that excludes the European Stability Mechanism (“ESM”) from the definition of financial end user in the Commission’s margin rules.  The final rule codifies no-action relief that has been in effect since 2017 that exempts the ESM from initial and variation margin requirements for uncleared swaps with swap dealer or major swap participant counterparties.  The final rule recognizes the ESM’s status as an intergovernmental institution that assists Euro-area members in financial distress and its similarity to multilateral development banks that are excluded from the definition of financial end user.  The ESM does not engage in speculative swaps trading and its swaps activities are in furtherance of its financial assistance programs.  The final rule provides certainty to both the ESM and its swap dealer counterparties in uncleared swaps, facilitates the ESM’s work in mitigating systemic risk, and poses minimal risk to the U.S. financial system.

The final rule also recognizes the importance of international comity in regulating entities established by sovereign governments for governmental purposes.  I encourage continued cooperation between the Commission and European authorities in maintaining mutual respect for our corresponding regulatory interests and expertise.

I thank the staff of the Division of Swap Dealer and Intermediary Oversight for their work on this final rule and their responsiveness to suggestions from my office.