Flashnews: CCPs UK - Towards an extension of temporary recognition
In its press release of 10 November 2021, the European Commission (EC) specified its intentions in the case of the British CCPs*.
Click here to read the press release.
As recalled in the letter, the objective is to not jeopardize the financial stability either in the short term (by abruptly banning access to UK CCPs and thus forcing the relocation of contracts)or in the medium term (due to excessive dependence on CCPs based in the UK).
In order to cover the short-term risk, the EC published a temporary equivalence decision on the regulatory framework for CCPs in September 2020, thus allowing ESMA to recognise 3 UK CCPs (LME Clear, ICE Clear and LCH). At the same time, the transfer of the clearing of derivatives within the Union was the subject of work carried out by various European institutions (the EC, the ECB, ...). They revealed the existence of preconditions, whether in terms of attractiveness, clearing offer of by European CCPs or supervision. As a result, the date of 30 June 2022, marking the end of temporary recognition/equivalence, became hardly tenable.
The EC therefore announced that an extension of the “temporary” period would be proposed in early 2022. Discussions on the medium term will have to continue along two lines: building an attractive European offer and providing the Union with an ad hoc supervision framework. Moreover, the cessation of temporary recognition/equivalence should only take place once the supervision system has been reviewed.
The EC is thus responding to the concerns expressed by the industry last September. In a joint letter many professional associations requested that the equivalence between Union and UK regulations be extended and that this extension be formalised as soon as possible.
To read our previous Flashnews on this topic, click here.
*CCP: Central Counterparty