LONDON (Reuters) - (This October 18 story has been refiled to correct paragraphs 2 and 7 to say the report will be finalised, not published.)
A report on risks to the stability of derivatives markets posed by Brexit could lead to regulatory intervention, European Commission officials said on Thursday, dismissing warnings they could tumble off a cliff if Britain leaves the EU with no deal.
EU financial services chief Valdis Dombrovskis said initial findings into potential stability risks to markets around Brexit Day next March will be finalised in coming days.
The study is being led by the Bank of England and the European Central Bank with input from the European Commission and Britain’s finance ministry.
Banks and the BoE have called on Brussels to take preventive action to avoid disruption to insurance and derivatives contracts if there is a no-deal Brexit.
Britain is taking legal steps to ensure contract continuity, but the EU has so far declined to mirror these moves.
Dombrovskis told a Politico event that the clearing of derivatives is one area of concern, but the private sector could take action to mitigate risks, such as shifting contracts from London to the EU before March.
Once the interim report is finalised, “we can see what concrete steps are necessary, whether there are also some regulatory steps that are necessary,” Dombrovskis said.
Britain hopes that a transition deal can be included in a divorce settlement, which would mean transactions between it and the EU could continue without disruption until the end of 2020.
Asked about concerns over derivatives in a no-deal Brexit, Dombrovskis’ top civil servant, Olivier Guersent, said: “There is no cliff.”
“On 30th of March... nothing happens,” Guersent said, adding that contracts would be dealt with on a case-by-case basis.
But banks say Brussels is slow to deal with potential contract disruption in order to pile pressure on them to staff new hubs in the EU before March and shift the contracts to them.
Mark Hoban, head of the IRSG, a financial services think tank backed by the financial sector, said the sector was waiting for regulators in Britain and the EU to sign cooperation agreements to deal with potential disruption to contracts.
“My suspicion is that you have got MOUs stuck in desk drawers on both sides of the Channel. What the regulators are waiting for is the green light from the Commission that allows conversations to happen.”
Giving the green light would give markets more confidence about Brexit Day, but instead there is unhelpful brinkmanship, Hoban said.
Reporting by Huw Jones; Editing by Hugh Lawson and John Stonestreet
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