The European Union has proposed allowing London to continue clearing trade within the bloc until 2028, a departure from its previous pledge that the post-Brexit agreement would end this summer, Luxembourg Times reports.
A spokesman for the European Commission, the EU’s executive arm, said it would consult with member states on extending the transition period by three years, until the end of June 2028.
“When it comes to clearing and CCPs, financial stability is our overarching objective, as this is the pillar upon which the Savings and Investments Union can develop,” added Olof Gill, referring to the central counterparty clearing houses.
It is part of the EU’s long-term financial system development project, also known as the Capital Markets Union, which is a core part of Financial Services Commissioner Maria Luis Albuquerque’s mission.
Brussels has spent the past five years trying to wrest control of EU clearing from London, the region’s dominant financial centre after Brexit. The effort has been met with scepticism by the financial industry, which believes Europe lacks the infrastructure to handle the trillions of euros of derivatives clearing done through London exchanges. Gill said on Wednesday:
“Two UK CCPs have been identified by the European Securities and Markets Authority (ESMA) as systematically important for the EU’s financial stability. An extension of the equivalence decision is therefore needed to avoid any risks to our financial stability in the short term, and give certainty and clarity to EU financial market participants.”
The deadline for postponing clearing has already been extended once from its original deadline of June 2022, after financial leaders, including Bank of England governor Andrew Bailey, repeatedly warned of the risk to financial stability if clearing is abruptly postponed.
The EU has since introduced a complex package of measures requiring EU-based banks and other organisations to have active accounts with EU clearing houses to prove they can move activities to Europe in the event of a crisis. The bloc’s more accommodating stance comes amid demands for pro-business measures that could boost growth.
