EU eyes rules for dealing with failing clearers and insurers

* Commission consults industry on resolution schemes

* Britain to adopt similar moves sooner

By Claire Davenport

BRUSSELS, Oct 8 (Reuters) - The European Commission may drawup rules for rescuing and closing down failing clearing housesand insurers, as regulators across the world seek to preventcollapsed businesses from wreaking havoc in financial markets.

Clearing houses and insurers, which are critical for thedaily running of financial markets, already handle huge volumesof trades and some of them will soon take on new trades worthover $600 trillion.

Clearing houses, such LCH.Clearnet and Deutsche Boerse's

Eurex Clearing, sit between the parties at either endof a trade to ensure it is completed.

They protect companies from default because they holdcollateral on behalf of their numerous members that can be usedto reimburse individual firms if one member becomes insolvent -a standard model used in various exchange-traded markets aroundthe world.

The Commission said on Monday it had launched a consultationto see if companies like central counterparties, securitiesdepositories and systemic insurance companies need rules fortheir recovery and resolution.

The EU's top regulator, Commissioner Michel Barnier, isalready promoting the creation of an agency to wind down problembanks, but this does not apply to clearing houses and insurers.

Central securities depositories say the same rules thatapply to winding down banks cannot also be applied to thembecause their operations are needed to keep markets going.

Central counterparties recently became more important to thefinancial system after new regulation put them in charge ofclearing so-called over-the-counter derivatives estimated to beworth over $600 trillion, according to figures from the Bank forInternational Settlements.

Britain announced at the beginning of August that it wouldgive its regulators new powers to wind down failing clearinghouses, saying that similar EU moves were too slow to arrive.

The UK law would allow the Bank of England to step in andensure continuity in critical clearing services.

(Reporting by Claire Davenport; Editing by Mark Potter)