Brexit - Irish Securities Settlement - Update

This communication provides the latest update in relation to Euroclear UK & Ireland’s ability to continue to offer Issuer CSD services from the expiry of the transition period (scheduled for 31 December 2020) in respect of:

• securities constituted under the law of Ireland ('Irish Securities Settlement')
• securities constituted under the laws of Cyprus, The Netherlands or Luxembourg, which are represented in the CREST system by way of registrar depository interests (DIs), where there is no other CSD in the holding chain ('Relevant DI Settlement')

The migration of Irish Securities Settlement from Euroclear UK & Ireland to Euroclear Bank as Issuer CSD is scheduled to be effective on Monday, 15 March 2021 (please refer to the Euroclear Bank as Issuer CSD for Irish corporate securities - Migration guide. Please contact your usual Relationship Manager for a copy if you are unable to access it via the Euroclear website).

Holdings in migrated Irish securities can either be retained in a Euroclear Bank account (either direct or via a custodian) or alternatively held as international securities (CDIs) in a CREST account.

From the expiry of the transition period, scheduled to be 31 December 2020, Euroclear UK & Ireland requires third country CSD recognition pursuant to the CSD Regulation (CSDR) in order to continue to provide Irish Securities Settlement and Relevant DI Settlement.

Euroclear UK & Ireland previously secured conditional third country CSD recognition in March 2019 to provide Irish Securities Settlement until March 2021. However, following the entry into force of the Withdrawal Agreement, this recognition is no longer applicable.

Euroclear UK & Ireland is in discussion with relevant authorities regarding recognition as a third country CSD. The key milestones in the recognition process are: an implementing act of the European Commission (EC) determining the lega and supervisory requirements for UK CSDs as equivalent to those in the EU, a subsequent application from Euroclear UK & Ireland to the European Securities and Markets Authority (ESMA) and a decision from ESMA. If an implementing act is passed then Euroclear UK & Ireland intends to formally submit an application seeking recognition in respect of Irish Securities Settlement and Relevant DI Settlement. As with the previous recognition, Euroclear UK & Ireland anticipates that any recognition would be time limited.

Whilst Euroclear UK & Ireland has been having discussions with the relevant authorities and taking steps to secure third country CSD recognition prior to the end of the transition period, Euroclear UK & Ireland cannot guarantee that such recognition will be granted. With this in mind your attention is drawn to our consultation paper – Potential Brexit Impacts:

Irish Securities and Euro Settlement- August 2018 which sets out potential options and mitigating actions should this recognition not be granted. Note: as a result of changes to the political landscape and/or further MyEuroclear News & updates regulatory analysis since the date of publication, aspects of this consultation paper may no longer be correct. In particular, Euroclear UK & Ireland notes that option (B), paragraph 2.3.2 is no longer a viable option.

Euroclear UK & Ireland intends to issue updates in relation to the recognition process. Euroclear UK & Ireland will continue to work together with stakeholders, particularly registrars, participants and issuers, to define and agree the required operational steps, timing and other relevant information.

Addressing demand from our customers, Euroclear UK & Ireland also intends to make and application to become a Qualified Intermediary for the purposes of Irish Dividend Withholding Tax on Irish securities held in CREST Depository Interest (CDI) form within the CREST system.

We are in the process of finalising our application to the Irish Revenue Commissioners and expect to publish further details of this service shortly.

In the run up to the UK’s exit from the EU, and during the transition period, Euroclear UK & Ireland and Euroclear Bank have issued a number of consultations and notifications which are available on our respective websites.

If you would like to discuss the above, please contact your Euroclear Relationship Manager who remains available to assist.