January 9, 2020 / 10:27 AM / 15 days ago

EU watchdog says can meet deadline for UK clearers after Brexit

LONDON (Reuters) - Assessing if UK-based derivatives clearing houses can access European Union investors after Brexit can be done by June, but a final decision would hinge on broader EU-UK trade negotiations, the bloc’s markets watchdog said on Thursday.

The London Stock Exchange’s LCH unit clears the bulk of euro-denominated swaps contracts that are widely used by companies and banks across the EU to hedge against adverse moves in interest rates.

The comments from the European Securities and Markets Authority (ESMA) provide a clear sign that UK financial services access to the EU post-Brexit will not be automatic, even if Britain maintains the majority of EU rules.

ESMA will play a key role in deciding if LCH can continue serving EU investors after Britain has left the bloc on January 31, and a “standstill” transition period that lasts until December has ended.

For LCH to have access, the EU must decide if UK clearers comply with rules that are “equivalent” to the bloc’s regulation in terms of protecting investors and financial stability.

Britain and the EU have agreed they would seek to complete assessments for equivalence by the end of June.

“We think indeed that from a technical standpoint that that is possible,” ESMA Chair Steven Maijoor told reporters. “But obviously this is much more around the political negotiations.”

Reporting by Huw Jones, editing by Sinead Cruise

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