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Britain and EU finalize temporary derivatives clearing accord

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The Bank of England and the European Union’s securities watchdog said on Monday (28 September) they have agreed on the information-sharing arrangements needed for the bloc’s banks to continue using clearing houses in London from January to June 2022, writes .

Britain’s unfettered access to the bloc ends on 31 December, and Brussels had already decided it would grant temporary access for UK clearing houses for 18 months.

An updated cross-border regulatory accord between the BoE and the European Securities and Markets Authority (ESMA) was also needed to implement the decision.

ESMA said the temporary access will apply to three clearing houses in Britain: the London Stock Exchange’s LCH, energy and agricultural futures and options clearer ICE Clear Europe, and LME Clear, which clears trades on the London Metal Exchange.

It has classified ICE Clearing and LCH as being “systemically important”, meaning they will face close EU scrutiny on an on-going basis, particularly in any market crisis.

Brussels has said that banks operating in the EU should use the 18 months to cut their “excessive reliance” on clearers in London.

During this period, ESMA will conduct a comprehensive review of the systemic importance of each UK clearer and take any “appropriate measures” to address financial stability risks.

Measures could include deciding that a foreign clearer or some of its clearing services are of such substantial systemic importance that it should not be allowed to serve EU customers, ESMA said.

“ESMA undertakes to conduct such a comprehensive review in due time,” it said.

LCH clears the bulk of euro-denominated interest rate swaps, a derivatives contract that helps companies shield themselves against unexpected moves in borrowing costs.

LCH said it would continue to engage and cooperate with authorities regarding “long-term permanent” access to the EU.

But EU policymakers and the European Central Bank have long wanted euro clearing relocated to the eurozone, now seen by the bloc as all the more urgent due to Brexit.

Eurex Clearing in Frankfurt has been building up market share in euro swaps clearing but banks so far have been loathe to shift large positions there due to cost and complexity.

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EU and Britain quickly approaching make or break moment in trade talks - EU diplomat

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Britain and the European Union are quickly approaching a make or break moment in talks on a trade deal and it is not clear if an agreement can be reached because of differences on three main issues, an EU diplomat said today (2 December), write Jan Strupczewski and John Chalmers.

The EU and Britain are negotiating a trade deal that would regulate their business relationship from next year, after the end of Britain’s transition period after its exit from the EU.

But negotiators cannot overcome differences on fisheries, state aid for companies and future dispute resolution.

“We are quickly approaching a make or break moment in the Brexit talks. Intensive negotiations are continuing in London. As of this morning it is still unclear whether negotiators can bridge the gaps on issues like level playing, governance and fisheries,” the EU diplomats said.

“As we are entering the endgame of the Brexit negotiations, some member states are becoming a bit jittery. So this was mostly an exercise to calm nerves in Paris and elsewhere and to reassure member states that team Barnier will continue to defend core EU interests including on fisheries,” the diplomat said.

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EU's Barnier says UK trade deal still hangs in balance - source

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The European Union’s Brexit negotiator Michel Barnier (pictured) told the 27 national envoys to Brussels today (2 December) that differences in UK trade talks persisted, according to a senior EU diplomat who was present at the closed-door briefing, writes John Chalmers.

“Differences still persist on the three main issues,” the diplomat said, when asked for the overall thrust of Barnier’s update to EU member states on the latest in Brexit trade talks.

“A deal still hangs in the balance.”

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Brexit talks still stuck because EU is asking too much, UK says

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Brexit trade talks are stuck on fishing, governance rules and dispute resolution because the European Union is asking too much of Britain, a senior member of the British government said on Tuesday (1 December), write and

Just 30 days before Britain leaves the EU’s orbit following a transition period since it formally quit the bloc, the sides are trying to agree a trade deal to avoid a turbulent rupture that could snarl almost $1 trillion in annual trade.

With each side urging the other to compromise, a French official said Britain must clarify its positions and “really negotiate”, and cautioned that the EU would not accept a “substandard deal”.

Even if a trade accord is secured, it is likely to be just a narrow deal on goods, and some disruption is almost certain as border controls are erected between the world’s biggest trading block and Britain.

Talks have snagged on fishing in Britain’s rich waters, on what EU rules London will accept and on how any dispute might be resolved.

“The EU still wants to take the lion’s share of the fishing in our waters - which is just not fair given that we are leaving the EU,” Michael Gove, Chancellor of the Duchy of Lancaster and a senior ally of Prime Minister Boris Johnson, told Sky.

“The EU still want us to be tied to their way of doing things,” Gove said. “The EU are at the moment reserving the right, if there is any sort of dispute, not quite to rip everything up but to impose some really penal and tough restrictions on us, and we don’t think that’s fair.”

A trade deal would not only safeguard trade but also buttress peace in British-ruled Northern Ireland, though some disruption is almost certain at the busiest EU-UK border points.

Failure to secure a deal would snarl borders, spook financial markets and disrupt delicate supply chains that stretch across Europe and beyond -- just as the world grapples with the vast economic cost of the COVID-19 outbreak.

UK's Gove says there's a chance of a no-deal Brexit

Gove said the process was close to conclusion but avoided repeating an earlier prediction of a 66% probability of a deal. He declined to put a figure on the probability.

German Chancellor Angela Merkel, Europe’s most powerful national leader, has said some of the EU’s 27 member states are getting impatient.

“The priority is for the British to clarify their positions and really negotiate to find a deal,” a French presidency official told Reuters. “The EU also has interests to fight for, those of a fair competition for its businesses and those of its fishermen.”

“The Union has made a clear and balanced offer for a future partnership with Britain. We will not accept a substandard deal which would not respect our own interests,” the official said.

Irish Prime Minister Micheal Martin said a deal could be done this week.

“There is a landing zone for an agreement,” Martin told the Irish Times in an interview. “We are now really in the endgame if a deal is to be arrived at this week.”

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