On February 4, the European Securities and Markets Authority (ESMA) and the Bank of England announced that they have agreed on Memorandums of Understanding (MoUs) surrounding the cooperation and information-sharing arrangements with respect to UK-based central counterparties (CCPs) and central securities depositories (CSDs) in the event of the United Kingdom’s exit from the European Union on March 29 (Exit Day) without an agreement on transitional arrangements being in place with the EU (no-deal Brexit).
The MoUs follow the adoption by the European Commission in December 2018 of temporary equivalence decisions on the future UK legal and supervisory framework for UK CCPs and CSDs (for further information see the December 14, 2018 edition of Corporate & Financial Weekly Digest). Although the texts of the MoUs have not been published, ESMA has described the MoUs as statements of intent to consult, cooperate and exchange information regarding UK CCPs and CSDs.
ESMA has previously made public statements of support for continued access to UK CCPs and CSDs, in order to limit the risk of disruption in central clearing and to avoid any negative impact on the financial stability of the European Union.
While the MoUs satisfy only one of four requirements for the recognition of UK CCPs and CSDs under the European Market Infrastructure Regulation and Central Security Depositories Regulation, respectively, ESMA aims to complete the remaining necessary steps and adopt recognition decisions “well ahead” of Brexit. In the event of a no-deal Brexit, the recognition decisions will take effect the day after Exit Day.
ESMA’s press release is available here
The Bank of England’s statement is available here.