The European Commission has launched the adoption procedure for a “time-limited” equivalence decision with European Union legislation for the UK's prudential rules on central clearing counterparties (CCPs), the institution confirmed on Tuesday 15 September.
Since Monday, the Commission has been consulting Member States on a draft text that would allow UK CCPs to continue to clear euro transactions for customers based in the EU after the end of the transition period, confirmed one of the Commission spokespersons, noting that this decision was announced in the July Communication on the state of preparedness for Brexit (see EUROPE 12524/10) and is aimed at addressing possible risks to financial stability after the UK's exit from the EU.
Approximately 75% of euro-denominated interest rate derivatives are cleared in the United Kingdom. However, from 1 January 2021, the three UK CCPs will become de facto third country CCPs.
“Such a time-limited decision would allow EU-based CCPs to develop further their capacity to clear relevant trades in the short and medium term and EU clearing members to take and implement the necessary steps, including by reducing their systemic exposure to UK market infrastructures”, explained the Commission in its communication.
According to the Financial Times, the draft text currently under discussion by Member States would provide for access to UK-based clearing counterparties to remain unchanged until 30 June 2022. The Commission's proposal is expected to be adopted before the end of the month, according to the newspaper. (Original version in French by Marion Fontana)