EC mulls adoption of a time-limited equivalence decision for UK CCPs
10 July 2020 Brussels
Image: JacobLund/Shutterstock
The European Commission (EC) has said it is considering the adoption of a time-limited equivalence decision for UK central counterparties (CCPs) in order to address the possible risks to financial stability.
This was confirmed in the EC’s new document “Getting ready for changes: Communication on readiness at the end of the transition period between the European Union and the United Kingdom”.
It was explained that such a time-limited decision would allow EU-based CCPs to develop further their capacity to clear relevant trades in the short and medium term.
Additionally, it would allow EU clearing members to take and implement the necessary steps, including by reducing their systemic exposure to UK market infrastructures.
“In order to enhance the supervision and regulation of clearing activities that are of systemic
importance for the union, the EU is currently implementing the European Market Infrastructure Regulation 2.2 Regulation,” the EC highlighted.
As such, the commission noted it is adopting the implementing measures that will determine the degree of systemic risk of third-country CCPs and the necessary measures to strengthen the supervision of such CCPs, as well as the possible need for further measures to mitigate those risks.
Following the publication of the EC’s communication on readiness at the end of the transition period, Oliver Moullin, managing director at Association for Financial Markets in Europe (AFME), said: "We welcome the confirmation that the European Commission is considering the adoption of a time-limited equivalence decision for UK CCPs.”
According to Moullin, this is essential to address a very important financial stability risk, and it is important that the equivalence and recognition are in place before the end of September to ensure that UK CCPs do not have to start the process of off-boarding clients.
"We hope that progress will be made in the negotiations and completing equivalence assessments in other areas. We also encourage the regulators to continue to work together to address remaining issues and minimise potential disruption at the end of the transition period,” he commented.
This was confirmed in the EC’s new document “Getting ready for changes: Communication on readiness at the end of the transition period between the European Union and the United Kingdom”.
It was explained that such a time-limited decision would allow EU-based CCPs to develop further their capacity to clear relevant trades in the short and medium term.
Additionally, it would allow EU clearing members to take and implement the necessary steps, including by reducing their systemic exposure to UK market infrastructures.
“In order to enhance the supervision and regulation of clearing activities that are of systemic
importance for the union, the EU is currently implementing the European Market Infrastructure Regulation 2.2 Regulation,” the EC highlighted.
As such, the commission noted it is adopting the implementing measures that will determine the degree of systemic risk of third-country CCPs and the necessary measures to strengthen the supervision of such CCPs, as well as the possible need for further measures to mitigate those risks.
Following the publication of the EC’s communication on readiness at the end of the transition period, Oliver Moullin, managing director at Association for Financial Markets in Europe (AFME), said: "We welcome the confirmation that the European Commission is considering the adoption of a time-limited equivalence decision for UK CCPs.”
According to Moullin, this is essential to address a very important financial stability risk, and it is important that the equivalence and recognition are in place before the end of September to ensure that UK CCPs do not have to start the process of off-boarding clients.
"We hope that progress will be made in the negotiations and completing equivalence assessments in other areas. We also encourage the regulators to continue to work together to address remaining issues and minimise potential disruption at the end of the transition period,” he commented.
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