PensionsEurope calls for PSAs to be given extension to UK CCPs equivalence decision

PensionsEurope has asked the European Commissioner, Mairead McGuiness, for an extension of the equivalence given to UK central clearing counterparties (CCPs) for European Pension Scheme Arrangements (PSAs).

In a letter to Mairead, who serves as the Commissioner for financial stability, financial services and capital markets, PensionsEurope CEO / Secretary General, Matti Leppälä, explains why, in his view, an extension to the equivalence of UK CCPs is necessary for pension schemes.

The European Commission has previously granted temporary and conditional equivalence to UK CCPS until 30 June 2022, to avoid “cliff edge risks” following the end of the Brexit transition period. It called for market participants to reduce their exposure to UK CCPs in this time and build up clearing capacities in the EU.

Leppälä said that despite PSAs following this advice, they are “afraid” that June 2022 does not allow enough time to fully switch to use only non-UK CCPs. Therefore, PensionsEurope is asking for the equivalence decision for UK CCPs to be extended by one year.

“The main concerns to PSAs to fully switch to clear only with the EU CCPs include the costs related to switching exposures and transition risks. Switching exposures can be costly, as the exposures in UK CCPs have different market values than in the EU CCPs. PSAs need to bear this transition risk when transferring exposure from UK CCPs to EU CCPs, and there are also fixed operational costs in doing transitions,” Leppälä wrote.

“Many PSAs are also worried that there is still no liquid market for interest rate swaps (IRS) in small currencies and other currencies denominated derivatives outside the UK. These derivatives are important for PSAs to manage interest rate risk and other risks, which are mainly in Member States outside the Eurozone.”

He said that in exchange for the extension, PSAs are willing to continue actively reducing their exposures to UK CCPs, and open and hold active accounts within the EU based CCPs.

    Share Story:

Recent Stories


Podcast: The benefits of private equity in pension fund portfolios
The outbreak of the Covid-19 pandemic, in which stock markets have seen increased volatility, combined with global low interest rates has led to alternative asset classes rising in popularity. Private equity is one of the top runners in this category, and for good reason.

In this podcast, Munich Private Equity Partners Managing Director, Christopher Bär, chats to European Pensions Editor, Natalie Tuck, about the benefits private equity investments can bring to pension fund portfolios and the best approach to take.

Podcast - The power of three: Using Common Contractual Funds to improve tax outcomes for investors
Large asset owners are still investing in equities in a way where they are taxed on their income. The implication is that they get a poorer return. They need to, and can, improve this, but how?

In this podcast, AMX Head of Client and Manager Development, Aaron Overy, and AMX Product Tax Specialist, Kevin Duggan, discuss with European Pensions Editor, Natalie Tuck, about three options to help ensure good withholding tax outcomes for institutional investors.
Mitigating risk
BNP Paribas Asset Management’s head of pension solutions, Julien Halfon, discusses equity hedging with Laura Blows

Europe’s pensions challenges
Francesca Fabrizi meets Matti Leppälä, Secretary General and CEO of PensionsEurope, to discuss the key aims and objectives of the association today.