The European Securities Markets Authority (ESMA) has agreed a deal with the Bank of England for the recognition of central counterparties (CCPs) and of the central securities depository (CSD) established in the UK, should there be a no-deal Brexit scenario.
Last year, ESMA announced through various public statements that its board of supervisors supports continued access to UK CCPs and to the UK CSD, in order to limit the risk of disruption in central clearing and to avoid any negative impact on the financial stability of the EU. It will also allow the UK CSD to continue to serve Irish securities and to limit the risk of disruption to the Irish securities market.
According to ESMA, it aims to recognise UK CCPs and the UK CSD in a “timely manner”, where the four recognition conditions under Article 25 of European Market Infrastructure Regulation, and the four recognition conditions under Article 25 of CSDR are met, respectively.
The new deal satisfies the third recognition condition—establishment of cooperation arrangements—under both regulations.
The deal also ensures that cooperation arrangements have been established regarding the CCPs and CSD and provide ESMA with adequate tools to monitor their ongoing compliance with the recognition conditions and to assess any material risk they pose, directly or indirectly, to the EU or any of its Member States, including to their financial stability.
ESMA aims to complete the next steps for the recognition of the UK CCPs and the UK CSD and to adopt the recognition decisions well ahead of Brexit date. The recognition decisions would take effect on the date following Brexit date, under a no-deal Brexit scenario.
