EU says European firms can still use UK clearing houses in no-deal Brexit
EU banks and companies will be able to access UK clearing houses for a limited time in the case of a no-deal Brexit, it has been confirmed.
Valdis Dombrovskis, vice-president of the European Commission, made the pledge after months of lobbying from companies urging for the rules stopping them using the institutions if the Brexit deals broke down to be changed.
The EU is now prepared to let continental firms access London’s clearing houses – as long as the UK stays close to Brussels’ regulatory and supervisory standards.
London is the world leader in the industry, with the London Stock Exchange-owned LCH clearing more than $525.8tn of interest-rate swaps in the first half of 2018 – up 23 per cent on the year before.
The pledge from the EU was welcomed by Stephen Jones, chief executive of UK Finance, who said: "The commitment to maintain temporary access to UK clearing houses is a welcome first step forward that recognises the importance of mitigating risks to financial stability in the event of a ‘no deal’ Brexit.
“It is positive that the joint working group of the Bank of England and European Central Bank is addressing this potential risk to our financial system.”
Dombrovskis did not indicate how long European companies would have access to the UK’s clearing houses for in the case of ‘no deal’, but he told the Financial Times the EU has “all necessary tools to act quickly in order to ensure no disruption in central clearing” of derivatives, adding: “The time remaining until March 30 2019 is sufficient in this respect.”
Miles Celic, chief executive of The City UK, said: “EU regulators are waking up to the financial stability risks posed by a no-deal Brexit, demonstrated by this temporary permissions regime to prevent EU firms getting cut off from London’s efficient global clearing markets.
"The industry is taking every action it can but failure to agree a Brexit deal will require additional support from regulators and legislators.
"Now, more than ever, these technical issues need to be separated from the politics of Brexit and dealt with sensibly and pragmatically to provide certainty to customers and clients across the continent.”
While the clearing house issue has been welcomed, there are still concerns over contract continuity after Brexit, particularly in relation to insurance and pension schemes.