ECB and BoE Announce Measures to Enhance Centrally Cleared Markets in EU (with Damianova Comment)

The European Central Bank ("ECB") and the Bank of England ("BoE") announced a series of measures that are intended to enhance financial stability regarding centrally cleared markets within the European Union.

The ECB and BoE agreed to "enhance arrangements" for information exchange and cooperation regarding UK central counterparties ("CCPs") with "significant euro-denominated business."

Additionally, the ECB and the BoE agreed to extend the scope of their standing swap line, if necessary and without committing to the provision of liquidity prematurely, in order to facilitate the provision of multi-currency liquidity support by central banks to CCPs that are established in both the United Kingdom and the euro area, respectively. According to the ECB and the BoE, CCP liquidity risk management remains first and foremost the responsibility of the CCPs themselves.

Damianova Comment: The larger context of this agreement for "enhanced arrangements" is the recent decision of the EU General Court that relates to CCPs in the UK. The Court ruled that the ECB could not force CCPs involved in the clearing of significant euro-denominated business to be located in the Eurozone. That ruling thus was beneficial to the City of London, which is outside of the Eurozone, but where three of the four biggest derivatives clearinghouses in Europe are based.

See: ECB Press Release.