EU-UK MoU to boost dialogue on CCP equivalence decisions

Panellists at IDX discuss improving UK-EU relationship following signing of MoU

20 June 2023


The recent signing of a memorandum of understanding between UK and the EU financial regulators is a step forward in improving coordination between the two sides and could pave the way for discussions on "thornier" issues such as equivalence, said panellists at FIA's International Derivatives Expo.

"The reason why the MoU is a step forward is that it allows us to look at regulation in the round, as a whole. We can then start to look at some of the thornier, slightly more political issues that have been difficult to discuss," said Jon Relleen, the UK Financial Conduct Authority's director of infrastructure and exchanges. 

The European Commission and HM Treasury signed the MoU in May to cooperate more closely through the creation of a joint EU-UK Financial Regulatory Forum, similar to one the EU already has with the US and the UK has with the US, Singapore and Japan.

While the MoU stops short of granting market access, it does put clearinghouse equivalence on the agenda with the Forum's mandate including dialogue on decisions concerning the adoption, suspension or withdrawal of equivalence decisions.  

Clearing is the only area where the EU has granted the UK temporary equivalence since Brexit, allowing UK-based CCPs to continue handling euro-denominated swaps trades until 30 June 2025, while the bloc builds up its own clearing capacity. 

"Each jurisdiction is autonomous on its decision on equivalence and the EU is ultimately going to take a view, and I certainly can't speak to that. However, from the UK point of view, one of the things we are keen to emphasise is that we are maintaining high regulatory standards and we are certainly not putting any obstacles in the way [of long-term equivalence from the EU]," said Relleen. 

"The MOU is another step on a journey in better cooperation and effective dialogue and I'm hopeful that that can lead to more thoughtful discussions. I don't necessarily think that we should see the MOU as suddenly unlocking this, but equivalence is explicitly mentioned on the list of things that those meetings will discuss and that itself is a helpful sign I think," he said.

"We know the market wants certainty. Uncertainty is unhelpful, so we will see how these discussions develop over time." 

The discussion came after FIA president and CEO Walt Lukken stressed the importance of cooperation between regulatory jurisdictions and reflected on an improving relationship between Europe and the UK in his opening remarks

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