While the securities industry had asked for the time limit statement to be taken out altogether, the three-year extension of equivalent treatment for UK clearinghouses in the EU was broadly in line with market participants’ hopes. Welcoming greetings come also both from UK regulator Bank of England and from the European Association of CCP Clearing Houses (EACH), yet the European Parliament chips in a caveat.
The European Commission’s decision followed about a month and a half after Europe’s finance industry associations had issued a joint statement lining out the arguments for extending the equivalence regime again. The equivalence terms would otherwise have expired on 30 June this year, but now gets another three years, until mid-2028. This is the third time that the setup is extended.
The EU markets’ dependence on UK-based clearinghouses, not least LSEG-owned LCH Ltd, inspires a balancing act on the side of the EU – doubling as the argument for extending equivalence as well as for eventually shutting it. Maria Luis Albuquerque, EU commissioner for financial services, says: “Central clearing is vital for well-functioning EU capital markets. With this extension of equivalence for UK CCPs we are safeguarding EU financial stability and avoiding short‑term risks. At the same time, we remain committed to reducing our over‑reliance on UK CCPs thus reducing risks to our financial system. This 3‑year extension will allow the recently agreed EMIR 3 measures to start taking effect, increasing clearing in the EU and reducing our exposure to UK CCPs”.
The European Commissions regulatory counterparty on the UK side, the Bank of England, issued a brief statement welcoming the decision. The European Association of CCP Clearing Houses (EACH), which hosts both EU and UK based clearinghouses as its members, shared a positive note, too.
“EACH members believe that the decision supports fair market access for UK CCPs to provide services in the EU internal market and avoids undue fragmentation of risks whilst strengthening legal certainty. EACH also notes and welcomes that UK authorities have granted a temporary and conditional equivalence regime for EU CCPs, providing reciprocal market access realities,” stated the association.
A more sceptical tone is heard from the side of the European Parliament, whose Committee on Economic and Monetary Affairs (ECON) was given only “a few days” to scrutinise the proposal. “The extension could disincentivise efforts to reduce excessive exposures to clearing services of substantial systemic importance provided by CCPs outside the Union, delaying the effective implementation of the active account requirement,” concludes the committee in its scrutiny paper.
