Monday

22nd Apr 2019

UK clearing houses could be moved to EU

  • Some London-based clearing houses could be, as a measure of "last resort" be forced to move to the EU, the commission proposed (Photo: Rob Bye)

The European Commission has proposed the EU should be able to force important clearing houses to be based in its territory.

The new rules, if adopted, could affect clearing houses in London after the United Kingdom leaves the EU. Ultimately, some London-based clearing houses could be forced to set up shop in the EU.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

Clearing houses, also known as central counterparties (CCPs), became more important after the 2008 financial crisis. They act as an intermediary between traders of financial products - such as currencies, interest rate derivatives, and credit default swaps.

The idea is that CCPs reduce the risk of insolvency. They are subject to EU rules already, but the commission, on Tuesday (13 June), also proposed to increase its supervision of CCPs, given their increased importance.

“CCPs were quite niche, but they have grown enormously,” said an EU official, who spoke on condition of anonymity.

There are currently 17 such clearing houses in the EU, with most of them focusing on a specific type of financial product.

The new rules proposed on Tuesday would make a distinction between clearing houses that posed no systemic risk to the EU's financial markets, those that are “systemically important” to the EU, and those that are “substantially systemically important”.

“The more important for the EU a CCP is, the more intense the supervision will be,” said the EU official.

It is not yet known which clearing houses would fall into which category, because that will be determined later.

The proposal, part of the EU's Capital Markets Union strategy, would grant a bigger role to the European Securities and Markets Authority (ESMA), an EU agency based in Paris.

The “substantially systemically important” clearing houses would be subject to more stringent controls by ESMA.

If such a clearing house was in a non-EU country, but “substantially systemically important” to the EU, it would have to accept a certain degree of supervision from ESMA.

If ESMA was unable to carry out that supervision satisfactorily, the EU commission could propose to member states that they demand the clearing house to be established in the EU. A majority of national governments would then have to agree.

This requirement, which the EU official said was a measure of “last resort”, was particularly relevant in the context of Brexit.

Some of the most important clearing houses are based in the UK, and around three quarters of clearing operations in euros currently take place in the City of London.

The EU official said the commission was already working on the new rules before the UK had decided to leave the EU, but that Brexit became "an additional factor".

EU financial services commissioner Valdis Dombrovskis mentioned Brexit in a press release on Tuesday.

“The continued safety and stability of our financial system remains a key priority,” he said.

“As we face the departure of the largest EU financial centre, we need to make certain adjustments to our rules to ensure that our efforts remain on track,” he added, referring to London.

The proposal will need to be approved by the European Parliament and national governments.

A second EU official said he had no indication that the UK would try to block the process, nor did he have an estimate of how often the “last resort” measure - forcing a clearing house to set up an EU office - might occur.

“The framework needs to cover all the eventualities,” the first official added.

The second contact noted that the requirement for being established in the EU could not be fulfilled by having a “letterbox” entity in the European Union.

“You have to have a business here, substantial activity,” he said.

The proposal would mean that the ESMA agency would need an additional 50 members of staff. It currently has around 200.

EU wants to fast-track the capital markets union

The European Commission says that Brexit and the loss of the City of London, the EU's main place for finance, is a reason to accelerate the integration of the bloc's financial markets.

Interview

EU election now a 'proxy referendum' on Brexit

The UK may end up participating the European elections in May, after all. For some, like Green MEP Molly Scott Cato, the election will now be a proxy referendum in the broader hope of reversing Brexit.

EU leaders ponder long vs short Brexit delay

EU leaders will discuss a Brexit extension, as requested by the British PM, to avoid a no-deal Brexit and allow more time for MPs to ratify the divorce deal. But they disagree on the length of the delay.

EU demands Brexit plan from May for delay

EU chief negotiator Michel Barnier said the EU is open to delay Brexit but will need a clear timeline from British premier Theresa May on how she wants to deliver an orderly withdrawal from the EU.

Feature

'Swexit' off menu at election for first time in 24 years

The Swedish Left Party have abandoned euroscepticism to campaign on climate change - whilst the hard-right Sweden Democrats spy possibilities of a link up with Matteo Salvini of Italy and France's Marine Le Pen.

Opinion

Brexit vs Grexit: The six stages of losing to the EU

Theresa May's venture seems very similar to the attempt by Alexis Tsipras in 2015 to persuade Brussels to accept his terms for the bail out - a huge negotiation failure, presented to the public as the best possible deal.

Stakeholders' Highlights

  1. Counter BalanceSign the petition to help reform the EU’s Bank
  2. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  3. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  4. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  5. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  6. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  7. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  8. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  9. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  10. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  11. Nordic Council of MinistersNordic commitment to driving global gender equality
  12. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan

Latest News

  1. Romania drafts EU code on NGO migrant rescues
  2. Bulgaria, Hungary, and Malta shamed on press unfreedom
  3. EU drafts $20bn US sanctions list in aviation dispute
  4. Brunei defends stoning to death of gay men in EU letter
  5. US Democrats side with Ireland on Brexit
  6. Wifi or 5G to connect EU cars? MEPs weigh in
  7. How Brexit may harm the new EU parliament
  8. EU parliament backs whistleblower law

Stakeholders' Highlights

  1. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  2. Nordic Council of MinistersNordic talks on parental leave at the UN
  3. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  4. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  5. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  6. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership
  7. Intercultural Dialogue PlatformRoundtable: Muslim Heresy and the Politics of Human Rights, Dr. Matthew J. Nelson
  8. Platform for Peace and JusticeTurkey suffering from the lack of the rule of law
  9. UNESDASoft Drinks Europe welcomes Tim Brett as its new president
  10. Nordic Council of MinistersNordic ministers take the lead in combatting climate change
  11. Counter BalanceEuropean Parliament takes incoherent steps on climate in future EU investments
  12. International Partnership For Human RightsKyrgyz authorities have to immediately release human rights defender Azimjon Askarov

Join EUobserver

Support quality EU news

Join us