Brussels has climbed down from a deadline to pull European finance firms’ access to London clearing houses, the bloc’s finance chief announced today.
Europe is planning on extending temporary permits allowing banks, brokers and fund managers on the Continent to use UK clearing houses until June 2025.
The news was first reported by the Financial Times.
Onshoring clearing activity to Europe has long been one of EU politicians’ main goals after Brexit.
However, the bloc’s top finance firms have been reluctant to move clearing activity from the City to Europe due to the enormous administrative and monetary costs of doing so.
London processes the vast majority of Euro-denominated financial contracts, meaning cutting the City off from EU firms after Brexit would likely gum up the normal functioning of Europe’s financial system.
European finance hubs simply lack the clearing capacity to replace London’s work load.
The extension of the deadline, which is now double the initial period Brussels had pencilled after Britain left the single market at the end of 2020, will prevent any “short-term ciff-edge effects” stemming from financial market volatility, Mairead McGuiness, the European commissioner for financial services, said yesterday.
The existing permit scheme was set to expire this June.
Conor Lawlor, managing director for capital markets at UK Finance, the banking lobby group, said: “Given the interconnected nature of financial markets and the important role that UK clearing houses play, this decision provides needed certainty for EU and global customers and clients accessing the UK’s clearing infrastructure.”