The EU’s securities regulator is on the cusp of wading into a major Brexit debate over the future of euro clearing.
The European Securities and Markets Authority will offer this week its verdict
on whether top U.K. clearinghouses are so important to the EU’s
financial system that they should no longer be recognized to provide
services from outside its borders, according to its new chief Verena
Ross, forcing them to move their services into the bloc.
The decision will have major political implications for the EU as it tries to shift euro clearing out of the U.K. after Brexit, as well as for the City of London’s future.
Ross, who took the helm of ESMA in November following a protracted appointment process, spoke to POLITICO last week in her first media interview since taking on the job.
The German regulator, who previously held the No. 2 post of executive
director at ESMA for ten years, said the authority is weighing how
important the two largest London clearinghouses — LCH and ICE Clear — are for the EU’s financial system.
“CCPs [have significant importance] for the EU financial markets. And
that is a financial stability issue that needs to be carefully
considered,” Ross said. “But at the same time, it needs to be carefully
considered what the consequences could be if you stopped at this point
in time the recognition as it currently exists.”
While Ross didn't tip her hand on which way ESMA’s assessment will
go, she struck a softer tone than Brussels policymakers by emphasizing
the risks that may stem from cutting off access to London’s powerhouses.
Her comments come after a chorus of warnings about the potential
fallout. The Centre for European Policy Studies, for example, has argued that sudden restrictions would put EU banks at a competitive disadvantage and damage the bloc’s economy. The derivatives industry has also sounded the alarm.
“In the end, if you decide not to withdraw recognition, the important
thing will be what can you do to potentially mitigate the risks to the
financial stability of the EU," Ross said. "Those are the type of
considerations we will be talking about."
Brussels, for its part, will be watching closely. The European Commission has staked political capital on luring euro clearing out of London, to the ire of U.K. policymakers...
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