23
THE UK-EU RELATIONSHIP IN FINANCIAL SERVICES
EU equivalence decisions
73. In contrast to the UK’s approach, the EU has so far granted the UK only
two equivalence decisions since the signing of the TCA, both of which were
time-limited. One, which was for six months and expired on 30 June 2021,
concerned central securities depositories. The other,
which concerns the
UK’s Central Counterparties (CCPs),
96
was granted for an initial 18-month
period. It was therefore due to expire on 30 June 2022 but was recently
extended for a further three years until 30 June 2025.
74. In a speech to the ECB on 6 April 2022, Mairead McGuiness, European
Commissioner for Financial Stability, Financial Services and Capital Markets
Union, said that this extension was “really important for [EU] financial
stability in the short term.”
She added, however, that “in the medium term,
we need to build up capacity in the EU and reduce our over-dependence on
UK-based CCPs … being heavily dependent on a third country for clearing
is unprecedented and it is not sustainable in the medium term.”
97
75. It remains unclear, however, whether the EU will be able to build up its own
CCP capacity by the expiry of the equivalence decision in June 2025. Rachel
Kent of Hogan Lovells told the Committee that
setting up clearing houses
“is probably one of the most complex legal tasks there is. That means that
any process for establishing clearing houses anywhere will take time.”
98
76. The Economic Secretary would not be drawn on whether he expected a
further extension to CCP equivalence, which he characterised as a matter for
the EU. He did, however, observe that “it is quite challenging …
to build up
that [CCP] infrastructure” because “to switch and ask people to move from
one jurisdiction to another involves additional costs”.
99
77. As for other equivalence decisions, Sir Jon Cunliffe explained that the EU
had initially been in the process of considering these for the UK, but that the
process had since been “paused”.
100
78. As part
of this consideration process, the Committee heard that the UK
Government had “painstakingly” filled in numerous EU questionnaires on
its domestic regime, amounting to “2,500 pages”.
101
Sam Woods of the PRA
said that there was “a little bit of frustration around
the enormous volume of
work that went into [the questionnaires] … with the very limited results”.
102
The Economic Secretary said: “we have done everything that the EU has
asked of us in co-operating and giving it the materials it needs to deem us
96 CCPs take on the credit risk between the parties to a transaction and provide clearing services for
trades in various financial products. Since the 2007–08 financial crisis,
the global financial system
has become increasingly reliant on CCPs to manage the risks associated with derivatives contracts.
According to evidence the Committee received from independent financial services consultant
Graham Bishop, this reliance creates “potential systemic risks” and means that CCPs have become
“the nuclear power station of the financial system: brilliant in success, catastrophic in failure.” Written
evidence from Graham Bishop (
RFS0011
)
97 Mairead McGuinness, Speech at the ECB/European Commission Conference on European financial
integration, ‘An EU financial system for the future’, (22 June 2021):
https://ec.europa.eu/commission/
presscorner/detail/en/SPEECH_22_2327
[accessed 7 June 2022]
98
Q 8
(Rachel Kent)
99
QQ 99–100
100
Q 30
101
Q 97
(John Glen MP)
102
Q 58
24
THE UK-EU RELATIONSHIP IN FINANCIAL SERVICES
equivalent or not. What I cannot then do is force
it to make a decision on
that”.
103
79. At present, therefore, the UK holds just one, time-limited equivalence
decision from the EU. This contrasts with the position of other jurisdictions
with large financial services sectors: the Committee understands that, as of
October 2021, the EU had issued 22 equivalence decisions to the US, 16 to
Singapore, and 14 to Switzerland.
104
Do'stlaringiz bilan baham: 
