According to ECB, the banks have agreed on improved arrangements for information exchange as well as cooperation regarding UK Central Counterparties (CCPs) with euro-denominated business.
The latest agreement follows a ruling by the General Court of the EU, which led the ECB to drop a policy requiring clearing houses that handle euro-denominated securities to be located in the euro zone.
The banks are extending the scope of their standing swap line to aid the provision of multi-currency liquidity support by both central banks to CCPs established in the UK and euro area, respectively.
Given these agreements, the ECB and the UK government have agreed to a cessation of all legal actions that cover the three legal cases raised by the government.
The EU General Court in its judgement on 4 March 2015 in case T-496/11 annulled the eurosystem oversight policy framework published by the ECB in so far as it sets a requirement for CCPs involved in the clearing of securities to be located within the eurozone.
A CCP, which places itself between the original counterparties to a transaction, gurantees the continuity of transaction if one party fails to honour the agreement. It protects itself by taking collateral from each party and by collecting a ‘default fund’ from its members to meet losses that exceed the margin it holds.
According to the central banks, the ECB and the UK government have agreed to cease all legal action that is linked to the lawsuits that Britain had filed in the matter.
