Commission extends UK CCP equivalence
09 February 2022 EU
Image: AdobeStock/areporter
The European Commission has confirmed that it will extend equivalence for UK central counterparties through to 30 June 2025.
In the wake of Brexit, the Commission has voiced concerns that the significant reliance of the EU financial system on services delivered by UK-based central counterparties (CCPs) could present risks for financial stability.
In September 2020, it enacted a time-limited equivalence decision for UK CCPs running until 30 June 2022 to offset potential risks to financial stability. In doing so, market participants in the EU have been encouraged to reduce their exposures to UK-based CCPs.
The European Commission formed a working group during 2021 — alongside the European Central Bank, European Supervisory Authorities and the European Systemic Risk Board — to develop a strategy for transferring derivatives clearing from UK to EU CCPs.
On 10 November 2021, EU commissioner for financial stability, financial services and Capital Markets Union Mairead McGuinness stated that the Commission would propose an extension of the equivalence decision, recognising that the working group requires more time to complete its work and stakeholders require more time to debate its recommendations.
This extension, until the end of June 2025, has been confirmed through today’s announcement. The Commission predicts that a further extension after this date is unlikely.
During the second half of 2022, the Commission will formulate a series of measures to develop central clearing in the EU.
This will include steps to enhance domestic capacity, delivering a more cost efficient and competitive clearing landscape in the EU and reinforcing liquidity at EU clearing venues.
Also, it will put forward measures to further strengthen risk management standards at EU CCPs and supervisory oversight of CCP activities within the EU.
EU commissioner Mairead McGuinness, says: “Ensuring financial stability and further developing the Capital Markets Union are our key priorities. Central clearing parties play an important role in mitigating risk in the financial system.
“The Commission plans to come forward with measures to reduce our excessive dependence on systemic third-country CCPs, and to improve the attractiveness of EU-based CCPs while enhancing their supervision. We call upon all relevant stakeholders to engage in the consultation being launched today.”
In the wake of Brexit, the Commission has voiced concerns that the significant reliance of the EU financial system on services delivered by UK-based central counterparties (CCPs) could present risks for financial stability.
In September 2020, it enacted a time-limited equivalence decision for UK CCPs running until 30 June 2022 to offset potential risks to financial stability. In doing so, market participants in the EU have been encouraged to reduce their exposures to UK-based CCPs.
The European Commission formed a working group during 2021 — alongside the European Central Bank, European Supervisory Authorities and the European Systemic Risk Board — to develop a strategy for transferring derivatives clearing from UK to EU CCPs.
On 10 November 2021, EU commissioner for financial stability, financial services and Capital Markets Union Mairead McGuinness stated that the Commission would propose an extension of the equivalence decision, recognising that the working group requires more time to complete its work and stakeholders require more time to debate its recommendations.
This extension, until the end of June 2025, has been confirmed through today’s announcement. The Commission predicts that a further extension after this date is unlikely.
During the second half of 2022, the Commission will formulate a series of measures to develop central clearing in the EU.
This will include steps to enhance domestic capacity, delivering a more cost efficient and competitive clearing landscape in the EU and reinforcing liquidity at EU clearing venues.
Also, it will put forward measures to further strengthen risk management standards at EU CCPs and supervisory oversight of CCP activities within the EU.
EU commissioner Mairead McGuinness, says: “Ensuring financial stability and further developing the Capital Markets Union are our key priorities. Central clearing parties play an important role in mitigating risk in the financial system.
“The Commission plans to come forward with measures to reduce our excessive dependence on systemic third-country CCPs, and to improve the attractiveness of EU-based CCPs while enhancing their supervision. We call upon all relevant stakeholders to engage in the consultation being launched today.”
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