Relief for City as EU expands bank access to London clearing houses

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The European Union must tell its banks that they can continue to access UK clearing houses until mid-2022, allying City fears that London may suddenly be left out of the lucrative market.Clearing houses – which process financial products worth hundreds of billions of pounds every day, acting as intermediaries between buyers and sellers of financial assets – have been a key topic of debate since the European referendum. Politicians on the continent had argued that EU derivatives should cleared in the EU rather than in London after Brexit.

Clearing plays a crucial role for London as a financial center, with the London Stock Exchange’s CHL dominating the continent’s annual € 735 trillion (£ 658 trillion) market.

There were fears that EU banks would lose access to clearing houses in January, threatening London’s dominance, but proposals leaked by the European Commission show the relationship can continue for another 18 months.

According to Financial Times the proposals argue that EU financial institutions should spend more time reducing their exposure to UK market infrastructure, with Brussels calling for ‘reducing dependence’ on the UK.

The plans emerged months after European Commission Vice-President Valdis Dombrovskis said the bloc would introduce “time-limited” provisions from January next year to ensure companies can still access the capital’s clearinghouses, an announcement hailed by the city which has long campaigned for existing trade deals to be preserved after Brexit.

Michael McKee, partner at DLA Piper law firm, said the extension of the agreements until 2022 was “recognition of the importance of compensation for the real economy of the EU. Politicians had to accept that if this extension is not granted, it will disrupt normal daily activities. for corporate treasurers in the EU “while the US-based Futures Industry Association tweeted that the move was” good news “.

Earlier this week, a source told Reuters that the European Commission was considering delaying any announcement on the matter due to Britain’s plans to violate part of the Brexit divorce settlement.

The UK did not come out of a four-year legal battle with the European Central Bank to clear eurozone transactions until 2015, but Brexit gave politicians, including former French President Francois Hollande, reasons to relaunch the debate.

The European Commission declined to comment.

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