(Adds LCH comment)
By Huw Jones
LONDON, Sept 28 (Reuters) - The Bank of England and the
European Union's securities watchdog said on Monday they have
agreed on the information-sharing arrangements needed for the
bloc's banks to continue using clearing houses in London from
January to June 2022.
Britain's unfettered access to the bloc ends on Dec. 31, and
Brussels had already decided it would grant temporary access for
UK clearing houses for 18 months.
An updated cross-border regulatory accord between the BoE
and the European Securities and Markets Authority (ESMA) was
also needed to implement the decision.
ESMA said the temporary access will apply to three clearing
houses in Britain: the London Stock Exchange's LCH, energy and
agricultural futures and options clearer ICE Clear Europe, and
LME Clear, which clears trades on the London Metal Exchange.
It has classified ICE Clearing and LCH as being
"systemically important", meaning they will face close EU
scrutiny on an on-going basis, particularly in any market
crisis.
Brussels has said that banks operating in the EU should use
the 18 months to cut their "excessive reliance" on clearers in
London.
During this period, ESMA will conduct a comprehensive review
of the systemic importance of each UK clearer and take any
"appropriate measures" to address financial stability risks.
Measures could include deciding that a foreign clearer or
some of its clearing services are of such substantial systemic
importance that it should not be allowed to serve EU customers,
ESMA said.
"ESMA undertakes to conduct such a comprehensive review in
due time," it said.
LCH clears the bulk of euro-denominated interest rate swaps,
a derivatives contract that helps companies shield themselves
against unexpected moves in borrowing costs.
LCH said it would continue to engage and cooperate with
authorities regarding "long-term permanent" access to the EU.
But EU policymakers and the European Central Bank have long
wanted euro clearing relocated to the euro zone, now seen by the
bloc as all the more urgent due to Brexit.
Eurex Clearing in Frankfurt has been building up market
share in euro swaps clearing but banks so far have been loathe
to shift large positions there due to cost and complexity.
(Additional reporting by William Schomberg; Editing by
Catherine Evans and Kirsten Donovan)
