EU in grab for City – Commission’s plot to move £461bn-a-day trade to continent
THE European Union (EU) is making a move to grab the City’s business as it prepares a host of rule changes on currency.
The capital clears three-quarters of all euro transactions
The EU could bleed London’s financial heart dry as spiteful eurozone leaders try to impose territorial restrictions on the clearing of euro-dominated transactions.
As the world’s largest centre for processing euro derivatives, the capital clears three-quarters of all euro transactions - despite not adopting the currency - amounting to £461billion a day.
But the European Commission is debating whether to back legal changes at the European Central Bank (ECB) which would give it control of the location of market infrastructure.
The UK has been battling for years the relocation of Euro clearing to the single currency area.
Britain recently won a four-year legal battle to stop an ECB policy which would have required clearing houses with a significant proportion of euro-dominated business to be based in the Eurozone.
Despite victory last year, the case was won on a narrow technicality rather than Britain’s arguments or objections.
And with Brexit looming the French are making a final push for restrictions to be imposed.
It is thought the plans will be a sticking point in the UK’s Brexit negotiations
French officials are aiming to have the new restrictions included in the legislative proposals scheduled for this spring, when Prime Minister Theresa May has said she will trigger Article 50 by.
But Eurozone leaders have confirmed it is likely the changes would be imposed before the UK completes the two-year process to officially leave the European Union, in 2019.
It is thought the plans will be a sticking point in the UK’s Brexit negotiations.
French president Francois Hollande, who confirmed he is not running for a second term in next year’s elections, has been vocal in his opinions to grab the business away from the City.
The UK has been battling for years the relocation of Euro clearing to the single currency area
This would increase costs considerably for banks and customers
The highly unpopular leader said the move should “serve as an example for those who seek the end of Europe”.
But an Intercontinental Exchange paper argued that the “forced repatriation” of euro clearing would “deprive European banks of access to liquid trading and clearing facilities and create fragmentation”.
Economist Roger Bootle says the Euro has divide the EU
In addition the ICE, the largest operator of exchanges and clearinghouses in European utilities, also noted the dire effects it could have on business.
They said: “This would increase costs considerably for banks and customers.”
French officials are aiming to have the new restrictions included in legislative proposals
And despite French plans to see the business move to the continent, the UK’s City minister, Simon Kirby, warned the business could move across the pond to the world’s financial centre, New York.
He said it would leave Europe “worse off” if they tried to engineer taking the business away from the City.
A French central bank was still ploughing ahead with plans, urging the commission the review the issue in the wake of Brexit.
An update to EU rules on derivatives trading and clearinghouses is to be published in April.