The European Commission is preparing to grant European banks temporary access to British-based clearing houses for an additional year in the event of a no-deal Brexit, ending uncertainty about the status of trillions of euros of financial derivatives. Brussels had failed to provide assurances that cross-border derivative contracts would be recognised in the event of a no-deal Brexit. Clearing houses provide the plumbing to the financial system as the exchanges over which derivatives are settled. London dominates European swaps and futures clearing, handling the bulk of the €660 trillion market. The Bank of England had warned previously that £41 trillion of derivatives — instruments used by companies to hedge against currency and interest rate risks — could fall foul of European law.

Source: The Times December 13, 2018 00:00 UTC