EU urged to provide clarity over clearing as patience wears thin ahead of Brexit

UK clearing houses and industry groups are growing increasingly impatient with the EU over the future of trillions of pounds worth of derivative contracts after Brexit.

Trade groups have written to the European Commission “urgently requesting” legal certainty that EU-based firms will still be able to use London clearing houses in the event of a no-deal Brexit.

The Bank of England has warned derivative contracts worth trillions may need to be closed or transferred this month unless the EU provides greater clarity.

The International Swaps and Derivatives Association, the Futures Industry Association, the Association for Financial Markets in Europe and the International Capital Markets Association co-signed a letter to Valdis Dombrovskis, the commissioner in charge of financial stability.

The European Commission told Morning Wire that Dombrovskis had received the letter and would reply in due course but reiterated its contingency plans published in November.

The plans confirmed that the European Securities and Market's Authority (ESMA) would adopt a “temporary and conditional equivalence decision” to minimise disruption in the event of no-deal.

But the Bank of England has increased the pressure on the EU in recent weeks, calling for more details.

Last week deputy governor Sir Jon Cunliffe told the Treasury Select Committee clearing houses needed more definition of the “conditionality, scope and timescale” of the temporary permissions granted by the EU.

Miles Celic, chief executive of The City UK, said: “The industry is taking every action it can to address these issues, but failure to agree a Brexit deal will require additional support from regulators and legislators in the EU.

“Now more than ever these technical issues need to be separated from the politics of Brexit and dealt with sensibly to provide certainty to customers and clients across the continent.”

UK Finance chief executive Stephen Jones welcomed the temporary access but called for further action to tackle what he described as a “cliff-edge” issue.