December 19, 2018

EC issued a communication on preparing for the withdrawal of the United Kingdom from the European Union by implementing its Contingency Action Plan. Also published were the questions and answers on the consequences of the United Kingdom leaving the European Union without a ratified Withdrawal Agreement (no-deal Brexit). This communication and the proposed legislation contains measures that are specific, limited, and targeted at remedying the negative impact of a disorderly withdrawal or at enabling the necessary adaptation of the legislation. The package covers 14 measures in a limited number of areas, including the financial services, where a “no-deal” scenario would create major disruption for citizens and businesses in the EU27.

As part of the Contingency Action Plan for financial services, EC has adopted the following measures:

  • A temporary and conditional equivalence decision for a fixed, limited period of 12 months to ensure that there will be no immediate disruption in the central clearing of derivatives.
  • A temporary and conditional equivalence decision for a fixed, limited period of 24 months to ensure that there will be no disruption in central depositories services for EU operators currently using UK operators.
  • Two Delegated Regulations facilitating novation, for a fixed period of 12 months, of certain over-the-counter derivatives contracts, where a contract is transferred from a UK to an EU27 counterparty.

EC considers it essential and urgent to adopt these measures to ensure that the necessary contingency measures can enter into application on March 30, 2019 to limit the most significant damage caused by a “no-deal” scenario in these areas. EC will continue to implement its Contingency Action Plan in the weeks to come and will monitor the need for additional action as well as continue to support member states in their preparedness work.

 

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Keywords: Europe, EU, Banking, Insurance, Securities, FMI, Brexit, No-Deal Brexit, OTC Derivatiives, Derivatives Contracts, Temporary Equivalence, EC