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Eurozone clearing

15 June 2015

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ECB and BOE agree on CCP oversight

In a decision with major implications for U.K. clearinghouses such as LCH.Clearnet and ICE Clear Europe, the General Court of the European Union issued a decision on March 4 rejecting the European Central Bank's efforts to require clearinghouses to be located in the Eurozone if they clear derivatives denominated in euros. The General Court found that the creation of such a requirement goes beyond mere oversight by intervening in the regulation of clearinghouse activity, and held that the ECB lacks the competence necessary to regulate that activity.

The ECB subsequently reached an agreement with the Bank of England aimed at addressing the ECB's concerns regarding the clearing of euro-denominated contracts. The two central banks announced a series of measures on March 29 aimed at enhancing financial stability in relation to centrally cleared markets within the EU, including arrangements for information exchange and cooperation regarding U.K. clearinghouses with significant euro-denominated business.

The two central banks also extended the scope of their standing swap line in order to facilitate the provision of liquidity in multiple currencies. They cautioned, however, that CCP liquidity risk management “remains first and foremost the responsibility of the CCPs themselves.”

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