The European Commission adopted on Monday 21 September, an equivalence decision with EU legislation of the UK prudential rules on central clearing counterparties (CCPs) limited to 18 months (see EUROPE 12560/24).
The decision, which was announced in the July Communication on the state of preparedness for Brexit (see EUROPE 12524/10), will therefore apply as of 1 January 2021 – the date on which the United Kingdom will have left the Single Market – and until 30 June 2022. In practical terms, it will allow UK CCPs to continue clearing euro transactions for EU-based customers after the end of the transitional period.
“The heavy reliance of the EU financial system on services provided by UK-based CCPs raises important issues related to financial stability”, the Commission said. This decision will give EU CCPs more time to develop their capacity to clear the transactions concerned and give EU clearing members sufficient time to reduce their exposure to UK market infrastructures.
The decision also aims to give the European Securities and Markets Authority (ESMA) time to conduct a full review of the systemic importance of UK CCPs for the EU and to take any appropriate action to address financial stability risks, including recommending to the Commission not to recognise a UK CCP or to withdraw its equivalence recognition, the text says.
The Commission, which may modify or suspend this decision at any time in the event of events affecting the recognition of equivalence, warns that the exchange of information and coordination of supervisory activities between ESMA and the Bank of England is an essential condition for maintaining this decision.
See the decision: https://bit.ly/2RM7NTC (Original version in French by Marion Fontana)