BoE governor sees no need for time limit to temporary extensions on intermediary rules
The EU should allow its banks and fund managers to use UK clearing houses indefinitely, Bank of England governor Andrew Bailey said on Thursday, just weeks after the EU proposed extending temporary permissions by three-years.
EU banks and fund managers have long used UK clearing houses but after Brexit Brussels baulked at being dependent on a non-EU country for the critical infrastructure that acts as an intermediary to prevent defaults on trades triggering a domino effect through markets.
The EU initially set a deadline of June 2022 for its banks and fund managers to wean themselves off London’s clearing houses, but last month announced a three-year extension to the “equivalence” regime allowing EU financial services firms to clear their trades through the UK.
However, Bailey told a dinner for lobby group The City UK that “there need be no time limit to this equivalence”. He pointed to the UK and EU’s “shared deep commitment to open markets and open financial systems with strong and appropriate regulatory standards and co-operation” that meant the UK regime could be equivalent to the EU’s indefinitely.
The European Commission did not immediately respond to a request for comment.
“Pushing for permanent is a shrewd step,” said Simon Morris, a financial services partner with law firm CMS. “[The] EU remains reluctantly dependent on the City, overshadowed only by its fear that key infrastructure lies outside its oversight. If the Bank of England continues to show its credentials as a strong regulator there is every prospect of prolongation.”
Last month, Mairead McGuinness, EU commissioner for financial services, said Brussels would begin consulting with member states on extending equivalence until 2025 to avoid “short-term cliff-edge effects” that could be triggered by the original deadline. ...
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