(Bloomberg) -- European banks will still be allowed to do some clearing in London after 2025, according to the head of the European Union’s top securities regulator.

Verena Ross, chair of the European Securities and Markets Authority, hinted at a softer position than previously stated by the European Commission, which has indicated that UK clearinghouses would be cut off once the country’s post-Brexit waiver expires.

“The equivalence agreement on clearing between the European Union and the UK was extended until 2025. That does not mean that all clearing has to shift on that date,” Ross said in an interview with Bloomberg News last month. 

The issue has become one of the most contentious disputes around post-Brexit financial services, drawing in the French government and the Bank of England. Ross’s comments seem to confirm widespread understanding in the market that there won’t be a hard stop in two-and-a-half years’ time for this critical part of markets infrastructure.

“It is about making sure that there is a sufficient balance of where clearing takes place and to make sure that the clearing activity that is happening outside of the EU doesn’t pose a systemic risk to the EU and its financial stability. It’s not binary,” Ross added.

Clearing is a key part of the finance world supporting banking, technology and legal jobs across the City of London. Clearinghouses such as London Stock Exchange Group Plc’s LCH operate at the center of markets, collecting collateral from both sides of a trade to ensure a default on one doesn’t spread panic through financial markets.

ESMA will have to define thresholds for how much of the clearing business should go through accounts in European clearinghouses, Ross said.

An EU official said the Commission’s position hadn’t changed. “We continue to strongly encourage market participants to move swiftly. The extension to 2025 gives them ample time to do so,” the official said in an email.

The Commission has extended the UK’s temporary right to clear trades from the bloc while also looking to increase the capacity of its own clearinghouses such as Deutsche Boerse AG’s Eurex and Euronext NV’s clearing service. The EU financial services commissioner, Mairead McGuinness, said a year ago that she was “very clear about this not being just an announcement that it’s three years and more will come. It will not.”

A spokeswoman for LCH said the firm will continue to engage and cooperate with regulators on long-term recognition under EU rules.

There are concerns that pushing clearing out of London too fast could encourage Wall Street banks to clear their interest-rate swaps in the US rather shift to the EU, handing New York another unexpected Brexit benefit. 

“If I can compress my dollars, euros and yen interest rate swaps in the US but can only compress dollars and yen in London, I will move my entire business to the US to preserve the regulatory capital benefits and savings of compression,” said Xavier Rolet, former head of the London Stock Exchange. “This is the risk.”

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