LONDON, Jan 18 (Reuters) - The European Union will extend
permission for banks in the bloc to continue using clearing
houses in London for a further three years from June while
efforts to end "over-reliance" on Britain are stepped up, its
financial services chief said on Tuesday.
The European Union wants to directly supervise clearing of
euro-denominated derivatives and build up "autonomy" in its own
capital market as Britain is no longer subject to the bloc's
financial rules since Brexit.
Mairead McGuinness had already said last November https://www.reuters.com/world/uk/eu-give-city-london-reprieve-over-euro-clearing-2021-11-10
that such permission, known as equivalence, would be extended
for an unspecified period from June 2022, when it is due to
expire, to give more time to shift clearing from London to the
"We are now consulting member states on this draft
equivalence decision, which will take the form of an
implementing act. We envisage to propose an extension of the
equivalence decision of three years - until end June 2025," a
spokesperson for McGuinness said.
Brussels has sought to persuade banks in the EU to relocate
swathes of clearing from operators like London Stock Exchange
Group, whose LCH arm clears about 90% of euro-denominated
interest rate swaps or about 90 trillion euros, to Deutsche
Boerse in Frankfurt but with little success.
Failing to extend clearing permission beyond June risked
disrupting markets by forcing banks to rapidly close positions
in London and reopen them elsewhere, a costly undertaking.
U.S.-based clearing houses have long-term EU equivalence and
banks said they could shift clearing to New York rather than
Frankfurt if forced to stop using London.
McGuinness said that in coming weeks she would also launch a
public consultation on measures to make the bloc an attractive
clearing hub, and on the supervisory arrangements for EU central
Banks have said they prefer using London because they can
net positions across different currencies to save on capital,
while Frankfurt largely focuses on just the euro.
Two industry bodies, the International Swaps and Derivatives
Association and the Futures Industry Association, welcomed the
early clarity on market access and said they would work with
Brussels to make EU clearing more attractive.
"This public consultation will feed into a strategy on
clearing to reduce in the medium term our over-reliance on UK
CCPs," Mc Guinness' spokesperson said.
(Reporting by Huw Jones; Editing by Louise Heavens, Pravin Char
and Jonathan Oatis)