EU agrees temporary permissions for financial services in no-deal Brexit

Earlier today, the European Securities and Markets Authority (ESMA) announced that it will give equivalence for UK central counterparties (CCPs) and central securities depositories (CSDs).

CCPs act between the buyer and seller of every trade on one or more financial market and CSDs are institutions that hold financial instruments. They allow ownership of those instruments to be transferred in electronic form through updating electronic ‘book-entry records’.

CCPs and CSDs will be granted equivalence for 12 months, meaning that the EU and the UK will recognise one another’s standards in the result of a no-deal Brexit.

Nicky Morgan MP, chair of the Treasury, said: “ESMA’s announcement is welcome news. As the Bank of England has said, Recognition would allow UK CCPs to continue to provide clearing services to their EU members, and EU banks to meet their obligations to UK CCPs.

“By agreeing to grant temporary equivalence for UK CCPs and UK CSDs, one more risk of a no-deal Brexit has been taken off the table.

“As the Committee concluded in its report on transitional arrangements last year, it is overwhelmingly in the economic interests of both the UK and the EU to reach an agreement on transition. A sudden reversion to a trade relationship based on WTO commitments would be damaging for both sides.”