Top Stories
EU gives itself three more years to end euro clearing reliance on London
Published by Jessica Weisman-Pitts
Posted on January 18, 2022
3 min readLast updated: January 28, 2026
Global Banking & Finance Review®
Company
Published by Jessica Weisman-Pitts
Posted on January 18, 2022
3 min readLast updated: January 28, 2026
The EU will extend euro clearing reliance on London until 2025, aiming to reduce dependence and enhance its financial autonomy post-Brexit.
By Huw Jones
LONDON (Reuters) -The European Union will extend permission for banks in the bloc to continue using clearing houses in London for a further three years from June while efforts to end “over-reliance” on Britain are stepped up, its financial services chief said on Tuesday.
The European Union wants to directly supervise clearing of euro-denominated derivatives and build up “autonomy” in its own capital market as Britain is no longer subject to the bloc’s financial rules since Brexit.
Mairead McGuinness had already said last November https://www.reuters.com/world/uk/eu-give-city-london-reprieve-over-euro-clearing-2021-11-10 that such permission, known as equivalence, would be extended for an unspecified period from June 2022, when it is due to expire, to give more time to shift clearing from London to the continent.
“We are now consulting member states on this draft equivalence decision, which will take the form of an implementing act. We envisage to propose an extension of the equivalence decision of three years – until end June 2025,” a spokesperson for McGuinness said.
Brussels has sought to persuade banks in the EU to relocate swathes of clearing from operators like London Stock Exchange Group, whose LCH arm clears about 90% of euro-denominated interest rate swaps or about 90 trillion euros, to Deutsche Boerse in Frankfurt but with little success.
Failing to extend clearing permission beyond June risked disrupting markets by forcing banks to rapidly close positions in London and reopen them elsewhere, a costly undertaking.
U.S.-based clearing houses have long-term EU equivalence and banks said they could shift clearing to New York rather than Frankfurt if forced to stop using London.
McGuinness said that in coming weeks she would also launch a public consultation on measures to make the bloc an attractive clearing hub, and on the supervisory arrangements for EU central counterparties (CCPs).
Banks have said they prefer using London because they can net positions across different currencies to save on capital, while Frankfurt largely focuses on just the euro.
Two industry bodies, the International Swaps and Derivatives Association and the Futures Industry Association, welcomed the early clarity on market access and said they would work with Brussels to make EU clearing more attractive.
“This public consultation will feed into a strategy on clearing to reduce in the medium term our over-reliance on UK CCPs,” Mc Guinness’ spokesperson said.
(Reporting by Huw Jones; Editing by Louise Heavens, Pravin Char and Jonathan Oatis)
The article discusses the EU's decision to extend euro clearing reliance on London for three more years, aiming to reduce dependence.
The EU is extending euro clearing in London to avoid market disruptions while working on reducing reliance post-Brexit.
The EU plans to make its own capital markets more autonomous and attractive for euro clearing, reducing reliance on UK CCPs.
Explore more articles in the Top Stories category
