Brexit Update: LCH Limited Article 25 Third Country Recognition by ESMA upon the end of the Transition Period on 31 December 2020; LCH SA continues to benefit from the temporary permissions from Bank of England
|Circular No.||LCH Circular No 4113|
|Date:||28 September 2020|
|To:||All LCH Clearing Members|
We are writing to update you on LCH Group’s approach to the United Kingdom’s (“UK”) withdrawal from the European Union (“EU”).
As a systemically important institution, our priority remains to ensure the orderly functioning of markets, continuity of service to our customers and to support financial stability.
On 23 January 2020, the UK Parliament passed the EU Withdrawal Agreement Bill, which resulted in the UK leaving the EU on 31 January 2020. Under the terms of the agreement, there was an 11-month transition period through to the end of December 2020. As a result, as of 1 January 2021, LCH Limited will become a Third- country CCP under EU framework (‘EMIR’) and will need to have appropriate authorisations in place to continue to provide clearing services to EU members.
In order to continue to provide legal certainty and predictability to clearing members and clients established in the Union, the European Commission published in the Official Journal on 21 September 2020, an Implementing Decision (EU) 2020/1308 determining that, for a limited period of time, the UK framework applicable to CCPs is equivalent to the EU framework. The equivalence will apply from 1 January 2021 and expire on 30 June 2022.
The European Commission also published in the Official Journal the EMIR 2.2 delegated acts on Tiering Criteria, third country CCP fees, and Comparable Compliance, which entered into force on 22 September 2020.
This completes the EMIR 2.2 framework for third country CCPs.
On this basis, on 28 September 2020 the European Securities and Markets Authority has announced the recognition of LCH Limited as a Tier 2 CCP under the EMIR 2.2 supervisory framework, in line with the temporary equivalence decision. As such LCH Limited will be directly subject to the requirements of EMIR and to ESMA supervision. We will continue to engage and cooperate with the relevant regulatory authorities in respect of the long-term permanent recognition of LCH Limited under EMIR 2.2.
Accordingly, we are pleased to confirm that there is no change in the fact that LCH Limited will be able to continue to offer all clearing services for all products and services to all EU members and clients at the end of the Transition Period.
LCH SA continues to benefit from a temporary permission from the Bank of England which was confirmed publicly on 24 January 2019. This permission will last for a maximum of three years after the end of the transition period, which may be extended by HM Treasury in increments of twelve months.
LCH reserves its right to take any action it considers appropriate at any time should there be a material change in circumstances. Members should continue to make their own assessment of the risks, take such advice as they consider necessary, and continue with their own Brexit preparations.
We thank you for your continued support and look forward to continuing to partner with you throughout the rest of the year and beyond. Please do not hesitate to contact your dedicated LCH relationship manager or the LCH Sales & Relationship Management team (LCHGlobal.SRM@lch.com) should you have any questions.