European Commission to give market participants 18 months to reduce exposure to UK CCPs

Maria Nikolova

The industry is strongly encouraged to work together in developing strategies that will reduce their reliance on UK CCPs.

The European Commission today adopted a time-limited decision to give financial market participants 18 months to reduce their exposure to UK central counterparties (CCPs).

The heavy reliance of the EU financial system on services provided by UK-based CCPs raises important issues related to financial stability and requires the scaling down of EU exposures to these infrastructures, the Commission explains. Accordingly, industry is strongly encouraged to work together in developing strategies that will reduce their reliance on UK CCPs that are systemically important for the Union.

On January 1, 2021, the UK will leave the Single Market. Today’s temporary equivalence decision aims to protect financial stability in the EU and give market participants the time needed to reduce their exposure to UK CCPs.

Valdis Dombrovskis, Executive Vice President for an Economy that Works for People said:

“We are adopting this decision to protect our financial stability, which is one of our key priorities. 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. Exposures will be more balanced as a result. It is a matter of financial stability.”

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