The European Securities and Markets Authority, Esma, has issued a Public Statement to address the risks of a no-deal Brexit in the area of central clearing.
The Authority said this was because its own Board of Supervisors wants to emphasise the need to ensure continued access to UK central counterparties, to limit the risk of disruption to Europe’s central clearing regime, and reduce risk to the EU’s financial market stability.
“Esma therefore welcomes the communication Preparing for the withdrawal of the United Kingdom from the European Union on 30 March 2019: a Contingency Action Plan, published on 13 November 2018 where the EC stated that it will act, to the extent necessary, to address financial stability risks in the EU arising from the withdrawal of the UK without any agreement,” the Authority stated.
“In such a scenario the EC has stated that it will adopt a temporary and conditional equivalence decision in order to ensure that there will be no disruption to central clearing.”
“Therefore, Esma is engaging with the EC to plan, as far as possible, the preparatory actions for the recognition process of UK CCPs, in case of a no-deal scenario. Esma has already started engaging with UK CCPs to carry out preparatory work. The aim is to ensure continued access to UK CCPs for EU clearing members and trading venues as of 30 March 2019, should all the conditions in Emir, including any conditions set out in the equivalence decision, be fulfilled.”
As forewarned in the EC outline of the Contingency Action Plan: “On 30 March 2019, the United Kingdom will become a third country. All Union primary and secondary law will cease to apply to the United Kingdom from that moment, unless a ratified withdrawal agreement establishes another date.”
“As emphasised in the Commission’s first Brexit preparedness Communication of 19 July 2018, irrespective of the scenario envisaged, the United Kingdom’s choice will cause significant disruption. The Commission has therefore consistently called on European citizens, businesses and Member States to prepare for all possible scenarios, assess relevant risks and plan their response in order to mitigate them. On 29 June 2018, the European Council renewed its call to Member States, Union institutions and all stakeholders to step up their work on preparedness at all levels and for all outcomes.”
As of writing the EU27 are yet to agree to the Draft Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community – with, for example, Spain’s prime minster citing Gibraltar’s status referenced in the Draft Agreement and threatening to refuse to sign a political declaration intended to be finalised by 25 November by EU heads of government.