(Adds more detail)
By Huw Jones
LONDON, Jan 9 (Reuters) - Assessing if UK-based derivatives
clearing houses can get access to European Union investors after
Brexit can be done by June, but a final decision will hinge on
broader EU-UK trade negotiations, the EU's markets regulator
said on Thursday.
The London Stock Exchange's LCH unit clears the bulk of
euro-denominated swaps contracts, which are widely used by
companies and banks across the EU to hedge against adverse moves
in interest rates.
The comments from the European Securities and Markets
Authority (ESMA) provide a clear sign that UK financial services
will not automatically have access to the EU after Brexit, even
if Britain maintains most EU rules.
ESMA will play a key role in deciding if LCH can continue
serving EU investors after Britain has left the bloc on January
31, and a "standstill" transition period that lasts until
December has ended.
For LCH to have access, the EU must decide if UK clearers
comply with rules that are "equivalent" to its regulation in
terms of protecting investors and financial stability.
Britain and the EU have agreed they would seek to complete
assessments for equivalence by the end of June to avoid a "cliff
edge" after December.
"We think indeed that from a technical standpoint that that
is possible," ESMA Chair Steven Maijoor told reporters. "But
obviously this is much more around the political negotiations."
Maijoor said an ESMA priority for the next three years was
to help build a deeper EU capital market.
Asset managers, banks and insurers based in Britain have
opened over 300 new hubs in the EU to avoid disruption from
Brexit, taking some jobs and trading activity from London and
helping EU efforts to deepen its capital market.
This could have a bearing on how much equivalence-based
access the EU will grant UK financial firms. Banks, insurers and
asset managers in Britain now have unfettered access to the rest
of the EU.
"It's important to realise that equivalence will be a
different environment than the environment where the UK is part
of the EU," Maijoor said.
"We all know that technically, the assessments will be
relatively straightforward because they apply EU law at this
stage. Progressing on equivalence decisions is really now in the
hands of the negotiations," Maijoor added.
British Prime Minister Boris Johnson said on Wednesday he
would not seek a trade deal with the EU based on close alignment
with EU rules, raising questions about the ability of
maintaining equivalence-based access over the longer term.
(Reporting by Huw Jones; editing by Sinead Cruise, Larry King)