The ECB will preserve “at least the current levels of involvement” of supervision over CCPs based in the UK after Brexit, according to its President Mario Draghi.
This will require deeper cooperation between the Bank of England and the ECB to preserve “the tools required to tackle potential systemic risk,” Draghi said at the Monetary Dialogue with MEPs in the European Parliament on Monday 29 May.
Draghi’s words came as a result of pressure from MEPs, including Neena Gill CBE - Labour MEP for the West Midlands - who used the dialogue to express concern about the possibility of an EU location policy, which would take CCPs out of the UK.
Speaking following Draghi’s response to her questioning, Gill said:
“An EU location policy would require UK- based CCP clearing houses to uproot after Brexit. This would cost the UK around 83,000 jobs,”
“Restricting a global market with an EU location policy would risk fracturing a well-functioning market which benefits the EU27 as much as the UK.”
“EU pension funds, banks, industry, would all be materially impacted by such a policy.”
“So it is positive to hear the ECB President talk optimistically about the necessary process needed for euro clearing houses remaining in the UK. Brexit must not force them out.”
A recent document released by the European Commission explained that an EU location policy was one of many options being considered, in addition to a stronger equivalence relationship, enhancing supervision and adjusting the third country CCP recognition mechanism.
However, Draghi told the EU lawmakers that ultimately “you have to decide” the final outcome on the future of UK-based euro clearing houses.
BACKGROUND: Mario Draghi, President of the European Central Bank (ECB) spoke during the Monetary Dialogue meeting with the Committee on Economic and Monetary Affairs (ECON), in the EP in Brussels on 29 May. Follow this link for photo and video of the event. The EU commission released a communication confirming it was considering whether to regulate or restrict overseas euro clearing houses, which are involved in the trading process as middlemen. Proposed legislation is expected in June.