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ECB and BoE strike CCP agreement 

March 30, 2015

Helen Bartholomew, IFR Asia

The European Central Bank and the Bank of England have agreed to co-operate more closely to monitor UK-based central counterparty clearing firms with significant euro-denominated business, bringing to an end to a four-year dispute over whether such entities should be forced to be domiciled in the eurozone.

The two central banks will enhance co-operation and information exchange for CCPs impacted, and in an effort to improve liquidity risk management, have extended the swap line arrangements to facilitate multi-currency liquidity provision to CCPs operating in the UK and euro area.

The arrangement follows a legal challenge brought by the UK after the ECB moved to restrict euro-denominated clearing business to firms based in the eurozone.

As part of its Eurosystem Oversight Policy Framework, published in 2011, the ECB argued that CCPs with daily net credit exposure in excess of €5bn in euro-denominated product categories must be legally incorporated in the euro area, with full operational control and responsibility over core functions exercised in the area.

Read more: IFR Asia

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