EU should ‘ditch time limit’ on access to UK clearing, says Bank of England governor

Andrew Bailey has said that there “need be no time limit” on EU banks having access to British clearing houses.

At the annual TheCityUK dinner, the Bank of England governor welcomed a recent announcement of a three-year extension of temporary equivalence for UK-based clearing.

Equivalence is a system which can be used to allow domestic market access to foreign firms in certain areas of financial services.

The EU’s original deadline for the end of equivalence, when banks in the region would need to look elsewhere for clearing, was set for June this year. However, last month the EU announced there would be an extension.

“Seeking to fragment the international system cannot be justified in light of the success of the post financial crisis approach,” said Bailey in a speech.

He said that the central bank will continue to work in “strong co-operation” with EU authorities to make sure risks in clearing houses are managed appropriately.

“But I have to say that maintaining a shared deep commitment to open markets and open financial systems with strong and appropriate regulatory standards and cooperation to support them means that there need be no time limit to this equivalence,” added the governor.

Earlier this week the European Affairs Committee opened a new inquiry into the impact of Brexit on the UK financial services market.

The Committee, which considers matters relating to the UK’s relationship with the EU and the EEA, will be looking at the impact of the absence of a framework for UK-EU regulatory cooperation. The inquiry will also explore the future of cross-borer UK-EU financial services trade in the absence of equivalence and the impact of regulatory divergence and agreements with third countries on UK-EU services trade.

The EU has granted the UK only two time-limited equivalence decisions for financial services since the signing of Trade and Cooperation Agreement (TCA). In contrast, the UK has granted equivalence to EEA member states in 28 of the 32 areas identified for the equivalence process.

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