European Securities and Markets Authority will assess whether London's clearing houses can maintain access to European Union customers by June, while it also plans to focus its efforts on boosting the bloc's planned capital markets union.
A final decision on whether London's key clearing houses — led by London Stock Exchange Group PLC's LCH arm, which clears the overwhelming majority of euro-denominated swaps, can continue to work with EU-based customers will be taken as part of the main negotiations between the U.K. and EU, timetabled to last until the end of 2020.
The U.K. is set to leave the EU on Jan. 31 with the bill to enable that to happen finally passing the House of Commons on Jan. 9. A transition period until the end of the year will then come into force during which all financial institutions can trade as before.
The EU must decide whether London's clearing houses can claim "equivalence" to its own rules and regulations and Reuters reported that ESMA chair Steven Maijoor said the regulator will complete its assessments by June.
With the departure of the U.K. from the bloc, the EU will lose its biggest capital market. So ESMA said one of its key priorities over the next three years is to strengthen its efforts in developing the EU's long-proposed capital markets union.
This is intended to establish a single capital market in the EU to provide businesses with an alternative to bank financing. It was originally intended to have the project up and running by 2019, but it is still far from completion.