For OTC derivatives, the redistribution of trading has been less clear-cut in direction, with dealers moving some activities to EU trading venues and others to US venues, the latter having equivalence arrangements with both the EU and the United 2/4  BIS central bankers' speeches  Kingdom. Towards a well-functioning capital markets union in the EU The events of the past year – the pandemic and Brexit – have put renewed emphasis on the need for the EU to have a well-functioning capital markets union. In fact, EU leaders have agreed to finance the recovery from the pandemic by borrowing collectively through financial markets. The issuance of high-quality euro-denominated sovereign bonds under the Next Generation EU (NGEU) recovery fund is a step towards achieving deeper, more complete and liquid capital markets and establishing a European safe asset. As the Commission intends to raise 30% of the € billion recovery fund by issuing green bonds, NGEU is also expected to contribute to further developing sustainable and green finance. In parallel, the Commission has set out 16 specific actions to boost the EU’s capital markets union, which are aligned with many of the ECB’s own priorities.4 These actions aim to deepen and further integrate European capital markets, in order to allow investors, savers, firms and market infrastructures alike to access a full range of services and products, regardless of where they are in the EU.
The Commission has set up a working group with EU authorities and industry to address the issues involved and to facilitate the transfer of derivatives contracts denominated in euro or other EU currencies to EU CCPs. From a supervisory perspective, UK CCPs have been recognised as third-country CCPs by the European Securities and Markets Authority (ESMA).3 And two UK CCPs have been recognised as being systemically important for the EU (Tier 2 CCPs). In line with the provisions of the European Market Infrastructure Regulation, this means that they are subject to ESMA’s supervision. This set-up helps to ensure that Tier 2 CCPs comply with EU regulatory standards. During this 18-month period of equivalence, ESMA will assess whether this set-up is sufficient to address risks to EU financial stability emanating from these two systemically important UK CCPs. As part of its responsibility for issuing the euro, the Eurosystem – which comprises the ECB and national central banks of the euro area – will develop its own stance on the matter and will contribute to ESMA’s assessment. At the end of this process, ESMA may recommend that the Commission deny the UK CCPs recognition to provide certain clearing services or activities in the EU if they pose excessive risks to financial stability. If this recommendation were to affect eurodenominated clearing services, the Eurosystem’s agreement would also be required.