The European Securities and Markets Authority (ESMA) announced this Friday that it would recognize Euroclear UK and Ireland Limited, the Central Securities Depository (CSD) established in the United Kingdom, as a third country CSD to provide its services in the European Union (EU) in the event of a no-deal Brexit.
With the Brexit deadline set to happen this month, the financial industry is increasingly preparing for a no-deal Brexit, with a transition period still yet to be officially agreed to. In order to avoid any disruption from Britain leaving the EU, many regulators and financial firms are putting safety measures in place, as is the case here.
According to the statement published by the European regulator, it has made this decision to allow the UK CSD to serve Irish securities, in order to avoid any negative impact on the Irish securities market as a result of Brexit.
“Having assessed the application and the information submitted by the UK CSD, and consulted the relevant authorities in accordance with the Central Securities Depositories Regulation (CSDR), ESMA considers that the conditions for recognition under Articles 25 of CSDR are met by the UK CSD in case of a no-deal Brexit. Therefore, it has adopted a decision to recognise the UK CSD as a third-country CSD under the CSDR,” the statement said.
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The recognition decision will come into effect the following day after the UK leaves the EU on March 29, 2019, if there is no agreement in place. The decision is not a complete surprise, as previously, the European watchdog has communicated that its Board of Supervisors supports the continued access to the UK CSD.
ESMA and FCA Prepare for Hard Brexit
This is also not the first no-deal Brexit plan ESMA has put into place. As Finance Magnates reported, three will be authorized clearing organizations in London, regardless of whether Britain leaves the bloc with or without a deal.
In the event of a so-called hard Brexit, LCH Limited, Ice Clear Europe and LME Clear Limited will be allowed to provide their services in the EU, a fact that was a welcome development for European financial markets.
The Financial Conduct Authority (FCA) is also putting a serious of measures in place to ensure financial market stability regardless of the Brexit outcome. This saw the regulator and the Bank of England set up agreements with US regulator the Commodity Futures Trading Commission to remove regulatory uncertainty regarding the derivatives market between the two markets.