UK Government grants CSDR, EMIR and CCPs equivalence to EEA states post-Brexit
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UK Government grants CSDR, EMIR and CCPs equivalence to EEA states post-Brexit 11 November 2020UK Reporter: Maddie Saghir
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The UK Government has granted central securities depositories (CSDs) in the European Economic Area (EEA) states Central Securities Depositories Regulation (CSDR) equivalence.
Rishi Sunak, chancellor of the exchequer, explained that CSDR will form part of UK law at the end of the transition period on 31 December 2020.
With equivalence granted, the Bank of England can then assess CSDs in the EEA for recognition, subject to establishing cooperation arrangements with the relevant EU authorities.
Sunak said that CSDs – once recognised – can continue to service UK securities and to exit the transitional regime contained in onshored Article 69 CSDR and Part 5 of The Central Securities Depositories (Amendment) (EU Exit) Regulations 2018.
Elsewhere, the UK Government has also granted equivalence to central counterparties (CCPs) established in EEA states.
Sunak said subject to entry into an appropriate cooperation arrangement between the Bank of England and the relevant national competent authority in that EEA state, and a CCP-specific recognition determination by the Bank of England, after the end of the transition period UK firms will be able to continue using EEA CCPs.
However, he noted this equivalence decision does not exclude EEA CCPs from the Temporary Recognition Regime (TRR).
Until recognition decisions are made, EEA CCPs who meet the relevant eligibility criteria will remain in the TRR, which is due to last until December 2023 and may be extended by HM Treasury.
Equivalence has also been granted to EEA states for Article 2A of European Market Infrastructure Regulation (EMIR).
This will enable UK firms to continue to treat derivatives traded on EEA regulated markets as exchange-traded derivatives rather than over-the-counter (OTC) derivatives.
Sunak explained that facilitating this continuity for firms minimises the disruption they will experience following the end of the transition period.
Finally, the government has granted equivalence to EEA states for Articles 107 (3),114(7), 115(4), 116(5), 132(3), 142(2) and 391 of the Capital Requirements Regulation. This direction covers seven equivalence decisions.
For UK firms, Sunak noted that these equivalence decisions will ensure they will not be subject to increased capital requirements as a result of their EEA state exposures.
The decisions are in addition to the directions already made by HM Treasury in 2019 which granted equivalence and exemption decisions to the EEA States.
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