Posted on 02/19/2019 4:51:18 AM PST by vikingd00d
Europe stepped up preparations for a no-deal Brexit on Monday after giving key parts of the City of London temporary access to EU customers in the event of a cliff-edge departure.
The European Securities and Markets Authority, the EU financial regulator, has granted three UK-based clearing houses — LCH, ICE Clear Europe and LME Clear — licences to carry on doing business with European-based customers over the next 12 months even if politicians fail to strike an agreement.
London dominates clearing for derivatives traded by European customers and clears nearly all over-the-counter derivatives, mainly interest-rates swaps, traded in euros.
Clearing houses are a vital part of the financial infrastructure and ensure stability by acting as the buyer or seller of last resort in the event of a customer default.
LCH, owned by the London Stock Exchange, dominates the trade but American-owned ICE Clear Europe and the London Metal Exchange’s clearing system LME Clear also form a key part of the plumbing in the EU financial system. Without an agreement, UK clearing houses would have had to turn away customers with EU contracts, potentially driving up costs for companies and customers who buy financial products.
The approval, albeit widely expected, was greeted with relief and follows an information-sharing agreement signed between ESMA and the Bank of England to help maintain regulatory equivalence between the UK and EU. ESMA started accepting applications from clearing houses in mid-December after the European Commission said it would offer temporary equivalence.
From March 30, EU clients can continue to use the London-based trio to clear trillions of dollars of derivatives if there is no deal, maintaining the status quo and stemming fears of market chaos.
“The last thing people need is uncertainty because you can’t start moving the trillions of dollars of business overnight. This represents welcome common sense and practicality on what was a trillion-dollar game of chicken,” said ION Markets’ Steve Grob.
Catherine McGuinness, policy chair at the City of London Corporation, said: “This is good news as it gives us short-term certainty in the event of a no deal.” She added that the City still needed reassurances over data transfers and contract continuity.
“If Oswald Mosley had only been a banker,” grumbled Adolf Hitler as he shoveled coal through the fire door of boiler #2 on Satan’s yacht.
Indeed, more and more economists are coming forward saying that Brexit is an economic non event, if not a win. Europe is in deep trouble and the UK is exiting the ship at the right time.
I hope the British pluck emerges post Brexit. Like a phoenix they need to rise from the ashes with renewed life, vigor and a determination to rebuild their country.
Temporarily while the Clearing houses shift work to Frankfurt, Paris, Dublin etc. - no one place is taking the work from London, but chunks are heading to different countries. Good business, now the London banks get a few more months to shift all the business out
err... which economists are calling it a non-event? Leave alone a win?
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