Leaving the EU: Central Counterparty Clearing — House of Commons, 2018-11-01
Topic: Mixed Topics
Christopher Michael Leslie (Labour, Centre-left): My hon. Friend rightly takes us to the more contemporary story about what is happening with these, because Brexit has put everything in limbo. Will these CCP operations be able to continue to service the vast majority of euro-denominated interest rate swaps or derivative products? The European Union had been developing new supervisory arrangements that would have included the UK. Brexit came along and of course those have all now been put into abeyance because the UK may be taken out of those jurisdictions. Time has ticked on and we are now five months, perhaps less, away from the moment of change, yet we still do not have any certainty about what will happen. However, we have heard various rumours Last week, the Governor of the Bank of England, Mark Carney, highlighted £41 trillion-worth of outstanding contracts that could be forcibly voided—that could fall out of legal certainty—if we do not get some sort of arrangement put in place. Earlier in the week, EU Commissioner and Vice-President Valdis Dombrovskis indicated that the EU might allow the UK CCPs after Brexit to operate on a temporary basis, with some strict conditionality. Of course we saw the report in The Times today that perhaps in the negotiations there was some sort of sense in which UK financial services companies, including these CCPs, would be able to operate on an equivalence basis, which is not as good as the arrangements we have, where we are around the table and able to make the rules on regulations. We would be a rule taker, but of course we may be allowed access to European markets—and, potentially, vice versa. The danger with that is that it is precarious and it could be switched off at a moment’s notice if policymakers fell out, for whatever reason As my hon. Friend has pointed out, today Commissioner Barnier poured a big old dose of cold water all over that, saying, "You should not believe everything you read in the paper." He reiterated that it was really in the hands of the EU to decide whether equivalence continued. This would not be an ideal situation at all, and the risk is that we would need to see CCP clearing services develop rapidly in other jurisdictions in Europe. Of course the Americans will have their arrangements, but that could start to undermine the centrality of the UK. That would be a great pity, because the UK has expertise and a relatively good regulatory approach, working with our European colleagues So the main question I want to put to the Minister is: what is the Government’s attitude to the future, long-term, stable, permanent regulation environment? Are we going to align ourselves closely or in harmony with the EU regulatory framework for central counterparty clearing arrangements? If that is the case, it would be useful to know that that is British Government policy at this stage, because that might then enable something to be built on equivalence. We could possibly move to a position in which the UK still has a say in the regulatory arrangements In my view, the public should be given a chance to think again about this whole thing and, if they want, there should be a people’s vote so that the option to remain is still viable. Nothing has been decided that should prevent that from happening. If we are to leave the European Union, it would not be a good thing to do so and put all these things up in the air. We should not fragment the financial safety regulatory arrangements and potentially put businesses, jobs and livelihoods at risk.