EU readies for euro clearing in ‘no deal’ Brexit

london — European Union regulators began on Friday to implement plans to ensure that trillions of euros in cross-border derivatives transactions would not be disrupted in the event of a “no deal” Brexit.

Britain and the EU are due on Sunday to endorse a divorce deal that includes a transition period from Brexit next March until the end of 2020, but it is unclear if there is enough support in Britain’s parliament to vote it through.

The European Securities and Markets Authority (ESMA) said on Friday it would begin the process of temporarily “recognising” clearing houses in Britain so they could continue clearing derivatives trades for EU customers after Brexit if no transition is in place.

LCH, an arm of the London Stock Exchange, clears more than 90 per cent of interest rate swaps in Europe, contracts that allow banks and companies to shield themselves against unexpected moves in interest rates harming their business.

French central bank governor Francois Villeroy de Galhau, who has spoken out against British clearing houses having access to European markets without EU oversight, said on Friday he supported a temporary solution in case of a no deal Brexit.

“But this would obviously have to be a temporary solution, for a period of no more than a year or so,” he told a regulatory conference in Paris.