EU steps up preparations for compensation of the euro in Brexit "without agreement"

LONDON (Reuters) – European Union regulators began Friday to implement plans to ensure that trillions of euros in cross-border derivatives transactions are not disrupted in Europe. Brexit case "no deal".

Britain and the EU must approve a divorce agreement on Sunday that provides for a Brexit transition period from March to the end of 2020, but it is unclear whether the UK parliament has enough support to do so. vote.

The European Securities and Markets Authority (ESMA) announced Friday that it would begin the process of "recognizing" temporary clearing houses in Britain so that they can continue to offset product transactions. derivatives for EU customers after the Brexit if no transition was in progress.

LCH, a branch of the London Stock Exchange (LSE.L), eliminates more than 90% of interest rate swaps in Europe, contracts allowing banks and companies to protect themselves against unexpected fluctuations in interest rates that affect their business.

The governor of the French central bank Francois Villeroy de Galhau, who spoke out against the access of European markets to European markets without EU control, said on Friday that he was supportive to a temporary solution in case of non-market, Brexit.

"But it should obviously be a temporary solution, for a period not exceeding a year or so," he said at a conference on regulation in Paris.

ESMA has received the green light from the European Commission to put in place contingency plans at the beginning of the month.

"The ESMA has already started working with the UK CCPs (clearing houses) to do some preparatory work," said the EU watchdog in a statement.

AFME, a lobby group for the European financial sector, said ESMA's announcement still lacked detail and timing.

The Bank of England said that preparations for a non-agreement on Brexit were urgent, but Brussels insisted for months that it be up to the private sector to act first.

PRESS PARIS

EU policymakers and the European Central Bank ultimately want more euro-denominated offsets to be located in the euro area, under the direct supervision of the block, when Britain becomes a non-member state from the EU.

LCH has a subsidiary in Paris and clients are transferring euro repo contracts to the French capital from London, but Villeroy wants the eurozone to build its own capital market after Brexit.

"Fortunately, LCH SA will centralize repurchase transactions early in 2019. More generally, we want to see an enhanced and extensive compensation services offering in the area of ​​interest rate derivatives in Paris."

Rival Deutsche Boerse offers a profit-sharing system to attract clearing transactions on euro-denominated repo transactions, government bonds and interest rate derivatives from LCH in London to Frankfurt.

LCH's parent company, LSE, has indicated that it is not considering applying for a license to offset interest rate swaps in Paris.