Supporting Statement of Commissioner Dan M. Berkovitz

Proposed Rule Excluding the European Stability Mechanism from Definition of Financial End User

October 16, 2019

I support the proposed regulation that would add the European Stability Mechanism (“ESM”) to the list of governmental entities excluded from the definition of financial end user in the Commission’s margin regulations.  The Commission has recognized for many years that entities established by governments like the ESM should be exempted from some of our regulatory requirements for financial entities.  These entities serve a governmental purpose that is not to speculate or profit from derivatives and therefor are less likely to engage in activities that would bring risk to the United States.  The ESM, an intergovernmental entity designed to assist EU member states in financial distress, would likely reduce systemic risk in the European Union.  If the 2008 financial crisis is any guide, reducing financial distress in one region of the world is likely to benefit the rest of the world, including the United States.

In addition, comity is an important consideration when regulating entities established by a foreign government for a governmental purpose.  The proposal will facilitate international comity and should encourage further cooperation.  Showing reciprocal, mutual respect for the important interests of other sovereigns is an important step to harmonizing regulation and facilitating global markets where appropriate.