United Kingdom (and EU regulation)

HM Treasury letter to the Chair of the Lord’s EU Committee regarding EMIR 2.2 and the recognition of CCP

By Simon Lovegrove (UK) on January 13, 2021 Posted in Clearing and settlement, United Kingdom

On 12 January 2021, HM Treasury published a letter from John Glenn MP (Economic Secretary to HM Treasury) to Lord Kinnoull (Chair of the European Union Committee, House of Lords) providing information on the following:

The deficiencies identified in the EU’s delegated acts implementing EMIR 2.2 and the timescale for introduction of EMIR 2.2 regulations in the UK. The letter notes that the Government took steps to ensure that the onshored EMIR 2.2 delegated acts were revoked immediately before the end of the transition period so that the Bank of England (BoE) can, subject to HM Treasury approval, finalise the UK’s own version of EMIR 2.2. In its annual report on the supervision of financial market infrastructure, presented to Parliament on 3 December 2020, the BoE has identified the development of its approach to recognition and supervision of incoming central counterparties (CCPs) as a priority. The BoE is currently considering its approach. In the meantime the BoE’s temporary recognition regime for CCPs will ensure that UK firms can continue to access the services provided by non-UK CCPs without disruption.
The Government’s assessment of the likelihood that changes in the UK regulation of CCPs might result in the European Securities and Markets Authority (ESMA) declining to grant ‘comparable compliance’, as well as the impact this this might have on UK CCPs. The letter notes that the European Commission has now adopted a Delegated Regulation on comparable compliance, which specifies the minimum elements to be assessed and the modalities and conditions ESMA should take into account when considering requests for comparable compliance. The letter notes that granting or declining comparable compliance is an autonomous decision for ESMA to make, based on the criteria outlined in EMIR 2.2 and the Delegated Regulation. Since the adoption of the Delegated Regulation, ESMA has not made any statement on its approach to comparable compliance.
The memorandum of understanding (MoU) agreed between the BoE and ESMA. The letter notes that the BoE has now published the MoU and a copy of it is attached to the letter. It adds that the MoU is broadly similar to the cooperation arrangements the BoE formalised with the United States Commodity Futures Trading Commission on 20 October 2020.