EU to extend temporary access to UK clearing houses

Brussels is planning to extend temporary market access to UK clearing houses as it steps up preparations to prevent financial turmoil should Britain crash out of the EU.

A temporary permit that allows EU investors to use UK-based clearing houses in the event of a no-deal Brexit is due to expire at the end of March next year. That has led to fresh fears among banks, fund managers and lawyers there could be extreme upheaval if the UK has not finalised its long-term relationship with the bloc by its expiry.

Valdis Dombrovskis, the EU commission vice-president responsible for financial services policy, told an event in London on Friday that central clearing was "a clear systemic risk in case of a no-deal Brexit".

“Regrettably, the risk to financial stability has not yet been fully removed, because industry has not so far fully prepared for a no-deal Brexit. Therefore, I intend to propose to renew this time-limited equivalence decision beyond that date, to prepare for any eventuality.”

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The permit will allow EU investors to access UK-based clearing houses, which form a core part of the plumbing of the financial system. The access rights would apply for all classes of cleared derivatives. The overwhelming majority of euro-denominated swaps are cleared in London. – Copyright The Financial Times Limited 2019