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European Commission announces “no deal” temporary measures for financial services

European Commission announces “no deal” temporary measures for financial services

  • United Kingdom
  • Brexit
  • Financial services and markets regulation

20-12-2018

On 19 December the European Commission published a new package of 14 measures limited to specific areas and to be time limited that it says are “absolutely necessary to protect the vital interests of the EU and where preparedness measures on their own are not sufficient”. The affected areas include financial services, air transport, customs and climate policy amongst others.

The temporary measures in respect of financial services are:

• A temporary and conditional equivalence decision for 12 months to ensure that there will be no disruption in central clearing of derivatives. This will allow the European Securities and Markets Authority (ESMA) to recognise temporarily central counterparties currently established in the United Kingdom, allowing them temporarily to continue providing services in the Union. The Commission has concluded that EU27 companies need this time to have in place fully viable alternatives to UK operators

• A temporary and conditional equivalence decision for 24 months to ensure that there will be no disruption in services provided by UK central securities depositories. It will temporarily allow them to continue providing notary and central maintenance services to operators in the Union. This will allow EU27 operators that currently have no immediately available alternative in the EU27 to fulfil their obligations under EU law

• Two Delegated Regulations facilitating novation, for a fixed period, of certain over-the-counter derivatives contracts with a counterparty established in the United Kingdom to replace that counterparty with a counterparty established in the Union. This allows such contracts to be transferred to an EU27 counterparty while maintaining their exempted status and thus not becoming subject to clearing and margining obligations under the European Market Infrastructures Regulation. Such contracts, pre-dating EMIR, are exempted from EMIR requirements. This act will ensure that a change of counterparty will not change that exempted status

These temporary measures a welcome news. While they do not go as far as the UK’s temporary permissions regimes, they will ensure that for the purposes of derivatives clearing and contracts, as well as for depositaries, there is a managed no deal without any cliff edges.

To read the Commission press release, click here.

To read the Commission communication, click here.

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