Banks and other financial market participants in the European Union will have until mid-2022 to cut their “excessive reliance” on derivatives clearing houses in Britain, the bloc’s executive European Commission said on Monday.
Britain, which hosts Europe’s biggest financial hub in London, left the EU in January and its unfettered access to the bloc ends in December.
EU financial services chief Valdis Dombrovskis said he has approved a proposal to allow clearing houses or central counterparties (CCPs) in Britain to continue serving EU customers for 18 months from January 2021.
“This time-limited decision has a very practical rationale, because it gives EU market participants the time they need to reduce their excessive exposures to UK-based CCPs, and EU CCPs the time to build up their clearing capability,” Dombrovskis said in a statement.
The Bank of England, which regulates LCH, said it welcomed the EU’s decision, though a time-limited one, to avoid shifting contracts in a short period which would raise financial stability risks.
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