UK CCPs to gain EU equivalency extension
18 November 2019 London
Image: Shutterstock
The European Commission鈥檚 (EC) vice president for financial stability, financial services and capital markets union has confirmed his intention to push for an extension to the equivalency period for UK central counterparties (CCPs) to their European peers.
During a speech at the Guildhall in London last week, Valdis Dombrovskis said that the deadline for the equivalence for UK-EU CCPs will be pushed back from it 30 March 2020 to counter the on-going Brexit uncertainty and "prepare for any eventuality鈥�.
It was not made clear in the speech when the new deadline date might be.
Dombrovskis鈥� highlighted that central clearing has been identified as a clear systemic risk in the case of a no-deal Brexit.
The EC initially addressed the issue last year via a temporary equivalence decision which was set to expire on 30 March 2020, however, the third delay UK鈥檚 withdrawal from the EU means that the risk to financial stability posed by Brexit has not yet been fully removed.
The UK's EU withdrawal period was originally meant to conclude in March 2019 but the deadline was later delayed until 31 October. Following UK Prime Minister Boris Johnson鈥檚 failure to get his version of the withdrawal bill through the House of Commons, the timetable was delayed again until 31 January 2020.
Dombrovskis鈥� comments came in the same week the International Swaps and Derivatives Association (ISDA) and 13 other trade associations sent a letter to the EC requesting that the EC extend the temporary equivalence determination for UK CCPs.
Other signatories include the Association for Financial Markets in Europe, the Alternative Investment Management Association, and the European Banking Federation.
The associations asked the EC to 鈥渆xtend the temporary equivalence until the date 18 months after entry into force of the relevant Commission delegated acts under European Market Infrastructure 2.2鈥�.
The letter also requested an additional three-month period to allow UK CCPs to serve termination notices to EU clearing members in the event that their recognition is withdrawn following the European Securities and Markets Authority鈥檚 review.
In a note to members on the letter, ISDA highlighted that it is important for the purpose of maintaining financial stability in the event of a 鈥楴o Deal鈥� Brexit for the EC to provide this certainty in a 鈥渢imely fashion鈥�.
Financial market jitters caused by Brexit have been on-going even before the October Brexit delay. At the start of the year, Rafael Plata, secretary general at European Association of CCP Clearing Houses (EACH) stressed the fact that the European CCPs post-Brexit plans need to be further developed.
During a speech at the Guildhall in London last week, Valdis Dombrovskis said that the deadline for the equivalence for UK-EU CCPs will be pushed back from it 30 March 2020 to counter the on-going Brexit uncertainty and "prepare for any eventuality鈥�.
It was not made clear in the speech when the new deadline date might be.
Dombrovskis鈥� highlighted that central clearing has been identified as a clear systemic risk in the case of a no-deal Brexit.
The EC initially addressed the issue last year via a temporary equivalence decision which was set to expire on 30 March 2020, however, the third delay UK鈥檚 withdrawal from the EU means that the risk to financial stability posed by Brexit has not yet been fully removed.
The UK's EU withdrawal period was originally meant to conclude in March 2019 but the deadline was later delayed until 31 October. Following UK Prime Minister Boris Johnson鈥檚 failure to get his version of the withdrawal bill through the House of Commons, the timetable was delayed again until 31 January 2020.
Dombrovskis鈥� comments came in the same week the International Swaps and Derivatives Association (ISDA) and 13 other trade associations sent a letter to the EC requesting that the EC extend the temporary equivalence determination for UK CCPs.
Other signatories include the Association for Financial Markets in Europe, the Alternative Investment Management Association, and the European Banking Federation.
The associations asked the EC to 鈥渆xtend the temporary equivalence until the date 18 months after entry into force of the relevant Commission delegated acts under European Market Infrastructure 2.2鈥�.
The letter also requested an additional three-month period to allow UK CCPs to serve termination notices to EU clearing members in the event that their recognition is withdrawn following the European Securities and Markets Authority鈥檚 review.
In a note to members on the letter, ISDA highlighted that it is important for the purpose of maintaining financial stability in the event of a 鈥楴o Deal鈥� Brexit for the EC to provide this certainty in a 鈥渢imely fashion鈥�.
Financial market jitters caused by Brexit have been on-going even before the October Brexit delay. At the start of the year, Rafael Plata, secretary general at European Association of CCP Clearing Houses (EACH) stressed the fact that the European CCPs post-Brexit plans need to be further developed.
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