Brussels is planning to extend access to London-based clearing houses for EU clients beyond next March in a bid to prevent financial turmoil if Britain leaves the bloc without a deal.
A temporary permit that treats UK clearing houses as EU firms post-Brexit is due to expire at the end of March, raising the prospect of European customers having to quickly shift their business away from London at considerable cost.
Speaking in London today, EU finance commissioner Valdis Dombrovskis said he would propose extending the agreement – known as an “equivalence”.
“I intend to propose to renew this time-limited equivalence decision beyond that date,” he said.
Dombrovskis said the extension was needed because “the risk to financial stability has not yet been fully removed, because industry has not so far fully prepared for a no-deal Brexit.”
The current equivalence agreement that extends to the end of March was agreed last year to give the financial services industry more time to prepare from Britain’s departure from the EU.
Brussels has warned that in the event of a no-deal Brexit, EU investment firms must trade euro-denominated shares within the bloc – many of which are currently traded in London.
The head of the City watchdog, Andrew Bailey, called for equivalence between the UK and EU post-Brexit in a speech in September, describing it as “the best option” to avoid overlaps in derivatives trading.
Catherine McGuinness, policy chair at the City of London Corporation, said the organisation “welcomed” Dombrovskis’ announcement.
“This is encouraging news for the CCPs and their customers across the EU, and would help to remove the immediate risk of disruption to EU clearing services.”
“Although there is a lot of work yet to be done on the long-term relationship, this extension would give much-needed breathing space in this area to work through the complex issues that remain,” she added.
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