No access to EU for UK’s derivatives clearing houses after June 2025
Bloc’s regulator launches a public consultation on incentives to shift clearing from London to the EU
11 February 2022 - 16:53
byHuw Jones
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
London — There will be no access to the EU for Britain’s derivatives clearing houses after June 2025, the bloc’s financial services chief Mairead McGuinness said on Friday.
Britain’s departure from the EU has largely severed the country’s financial services ties with the bloc.
But clearing in London of euro-denominated derivatives for banks and asset managers in the EU was allowed to continue because of the risk of market disruption if the huge volumes involved had to be moved in a short time.
The London Stock Exchange’s LCH business holds €92-trillion in euro interest rate swaps positions, compared with €11.4- trillion at Deutsche Boerse in Frankfurt.
Brussels on Tuesday extended “equivalence”, meaning UK clearing access, until June 2025 for a final time to reduce heavy “over-reliance” on clearers in London.
Bank of England governor Andrew Bailey said on Thursday that Brussels should not have set a time limit on clearing access, and that seeking to fragment the international financial market cannot be justified.
McGuinness said the EU had an open financial market and wanted to build up its own capital market.
“I am very clear that June 2025 is the end of equivalence for UK clearing houses,” McGuinness told a Politico event.
Shares in London Stock Exchange Group were down 3.5%, compared with a 0.7% drop in the FTSE 100 blue chip index.
She has launched a public consultation on “incentives” to shift clearing from London to the EU in an industry that has so far resisted pressure to do so.
“It will not happen organically, which is why we will need to intervene,” McGuinness said.
An exchange official said only about 25% of euro clearing at LCH is between EU counterparties, meaning coming under Brussels’ regulatory purview.
The Brexit trade agreement between Britain and the EU includes a “memorandum of understanding” to set up a forum for financial regulators to hold regular discussions, a step banks hoped would open the door to EU market access later on.
The EU has yet to approve the new forum and McGuinness said the forum would not be launched until issues over the Northern Ireland Protocol, which Britain is refusing to adhere to in full, are resolved.
“Our hope would be we could see the finalisation of these problems that need to be solved, and that then we could move forward,” McGuinness.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
No access to EU for UK’s derivatives clearing houses after June 2025
Bloc’s regulator launches a public consultation on incentives to shift clearing from London to the EU
London — There will be no access to the EU for Britain’s derivatives clearing houses after June 2025, the bloc’s financial services chief Mairead McGuinness said on Friday.
Britain’s departure from the EU has largely severed the country’s financial services ties with the bloc.
But clearing in London of euro-denominated derivatives for banks and asset managers in the EU was allowed to continue because of the risk of market disruption if the huge volumes involved had to be moved in a short time.
The London Stock Exchange’s LCH business holds €92-trillion in euro interest rate swaps positions, compared with €11.4- trillion at Deutsche Boerse in Frankfurt.
Brussels on Tuesday extended “equivalence”, meaning UK clearing access, until June 2025 for a final time to reduce heavy “over-reliance” on clearers in London.
Bank of England governor Andrew Bailey said on Thursday that Brussels should not have set a time limit on clearing access, and that seeking to fragment the international financial market cannot be justified.
McGuinness said the EU had an open financial market and wanted to build up its own capital market.
“I am very clear that June 2025 is the end of equivalence for UK clearing houses,” McGuinness told a Politico event.
Shares in London Stock Exchange Group were down 3.5%, compared with a 0.7% drop in the FTSE 100 blue chip index.
She has launched a public consultation on “incentives” to shift clearing from London to the EU in an industry that has so far resisted pressure to do so.
“It will not happen organically, which is why we will need to intervene,” McGuinness said.
An exchange official said only about 25% of euro clearing at LCH is between EU counterparties, meaning coming under Brussels’ regulatory purview.
The Brexit trade agreement between Britain and the EU includes a “memorandum of understanding” to set up a forum for financial regulators to hold regular discussions, a step banks hoped would open the door to EU market access later on.
The EU has yet to approve the new forum and McGuinness said the forum would not be launched until issues over the Northern Ireland Protocol, which Britain is refusing to adhere to in full, are resolved.
“Our hope would be we could see the finalisation of these problems that need to be solved, and that then we could move forward,” McGuinness.
Reuters
EU proposes to force exchanges to share trading data among themselves
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.