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Regulation Around the World: Open Finance
In this issue of Regulation Around the World we look at how regulators are developing their proposals for Open Finance.
United Kingdom | Publication | March 2019
This article was originally published in Butterworths Journal of International Banking and Financial Law.
Nature abhors a vacuum and even more so sophisticated financial institutions, financial markets and the European Commission. The remaining uncertainty as the UK struggles to finalise an agreement on leaving the EU means that firms must continue their planning based on a “no-deal” scenario. Indeed, the European Commission has begun preparations for a no-deal Brexit.
Even if a withdrawal agreement is finalised with a transitional period, this merely postpones the inevitable. As such, firms and financial institutions must continue contingency planning regarding the implications and arrangements around clearing and settlement of euro-denominated products.
On December 19, 2018 the European Securities and Markets Authority (ESMA) issued a statement to remind firms of their MiFID obligations on disclosure of information to clients in the context of the UK withdrawing from the EU. The message is clear: do not wait, act now.
The Commission adopted the following limited contingency measures to safeguard financial stability post-Brexit
The obvious: similar to in 2011,2 the European Commission and the ECB ultimately want to see more euro-denominated clearing located in the Eurozone under the bloc’s direct supervision under the ESMA once Britain becomes a non-EU state. Equivalence in the transitional period prevents immediate disruption in the central clearing of derivatives, yet transitional periods are temporary by nature.
European Commission, ‘Proposal for a Regulation of the European Parliament and the Council amending Regulation (EU) No 1095/2010 establishing a European Supervisory Authority (European Securities and Markets Authority) and amending Regulation (EU) No 648/2012 as regards the procedures and authorities involved for authorisation of CCPs and requirements for the recognition of third country CCPs of 13 June 2017, COM (2017) 331 final, 2017/0136.
In 2011 the Eurosystems Oversight Policy Framework called for settlement activity to be performed by institutions “legally incorporated in the eurozone with full managerial and operational control” and supervised by the ECB. In 2015, following a challenge by the UK, the European Court of Justice ruled that the ECB lacks the competence necessary to regulate the activity of securities clearing systems (ie that competencies with regard to “payment and clearing systems” do not cover all clearing systems relating to transactions in securities) (United Kingdom v ECB Case T-496/11).
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In this issue of Regulation Around the World we look at how regulators are developing their proposals for Open Finance.
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