European Commission grants the UK three additional years of equivalence for clearing

European Commission grants the UK three additional years of equivalence for clearing
Опубликовано: Tuesday, 08 February 2022 16:37

The decision has been taken in the EU’s interest, but in 2021 the Irish Commissioner for Financial Services Mairead McGuinness (pictured) said: “The Commission remains of the view that over-reliance on UK-based central counterparties (CCPs) for some clearing activities is a source of financial stability risk in the medium term and will pursue its work to develop the capacity of EU-based CCPs as a means to reduce such over-reliance.”

“The Commission’s announcement is good in that it provides clarity for the companies affected in the short term, but many questions remain unanswered in the long term. If we continue to extend the equivalence decision, we will never succeed in bringing euro clearing back to the EU,” said Marcus Ferber MEP, the economic policy spokesman for the European People’s Party Group in the European Parliament.

“Since Brexit, the Commission has only twiddled its thumbs and has not developed a strategy for bringing euro clearing to the continent. The big beneficiary of this is the financial centre of London. The Commission must no longer put the issue on the back burner. A clear schedule with concrete measures must now be drawn up quickly. This also includes clear incentives for market participants. In the future, the euro clearing must take place in the EU — that is also a question of financial stability.”

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The Commission has established a Working Group (together with the European Central Bank, the European Supervisory Authorities and the European Systemic Risk Board) in 2021 to explore the opportunities and challenges involved in transferring derivatives from the UK to the EU. The discussions at the Working Group showed that a combination of different measures to improve the attractiveness of clearing, to encourage infrastructure development, and to reform supervisory arrangements were needed to build strong and attractive central clearing capacity in the EU in the years to come. The timeframe of June 2022 was considered too short to achieve this.

Nevertheless, today (8 February) the Commission launched a targeted public consultation to expand central clearing activities in the EU and improve the attractiveness of EU CCPs in order to reduce the EU’s overreliance on systemic third-country CCPs.

Commissioner McGuinness: “Ensuring financial stability and further developing the Capital Markets Union are our key priorities. Central clearing parties (CCPs) play an important role in mitigating risk in the financial system.”

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In the second half of 2022, the Commission will come forward with measures to develop central clearing activities in the EU. First, the aim is to build domestic capacity, making the EU a more competitive and cost-efficient clearing hub and to enhance EU CCP’s liquidity. Secondly, it is essential that risks are appropriately managed and the EU’s supervisory framework for CCPs is strengthened, including a stronger role for EU-level supervision.

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