Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

London must not become offshore centre post Brexit - CFTC chair

Published 04/06/2019, 18:27
© Reuters. Bank of England press conference

By Huw Jones

LONDON (Reuters) - Policymakers should "tether" London to the European Union to avoid isolating the region's largest financial hub, harming the euro zone economy and spawning an offshore financial centre, the head of the U.S. derivatives watchdog said.

"It is clear that London is shedding, and will continue to shed, a not insignificant amount of its financial service offerings and specialties to other European financial centres as a result of Brexit," Christopher Giancarlo, chairman of the Commodity Futures Trading Commission (CFTC), said on Tuesday.

Banks, insurers and asset managers using London as a gateway to investors across the EU have opened hubs in Dublin, Paris, Frankfurt, Amsterdam and Luxembourg to maintain customer links.

"Despite this, I believe that London will remain one of the world's major financial centres and Europe's largest," Giancarlo said in a speech in London's financial district.

EU policymakers want to see chunks of clearing in euro-denominated transactions shifted from London to Frankfurt where they can be closely scrutinised, in a proposed move Giancarlo called "Fortress Europe".

Giancarlo said it was not in the EU's interests to restrict financial activities to the euro zone as the bloc needs the type of access to global capital that no EU city was capable of assembling any time soon.

"In short, the EU needs the City of London, and the City of London needs the EU. I expect that sooner or later that is going to become apparent to the political classes on both sides of the Channel," said Giancarlo, who is due to step down shortly.

Even without Brexit, there would be some "rebalancing" between London and other European financial centres as the EU builds a capital markets union, he said.

London also needs the EU to remain an integral part of the European economy and avoid becoming an "offshore" financial centre, Giancarlo added.

Brussels has said that financial firms in Britain face a narrow form of access to the EU available to other "third" countries like the United States and Japan, which falls far short of the unfettered access enjoyed at present.

Giancarlo said that keeping London "tethered" to Europe after Brexit should be a starting point for policymakers, otherwise activities will flow from Britain to New York and Asia, and Europe's economy would suffer.

Brussels rejected a broad two-way form of "mutual recognition" access proposed by Britain's financial sector and Giancarlo said industry needed to step up.

"Leaders of business and finance from both sides of the Channel need to get together and persuasively explain to their respective political representatives why the EU and the City need each other," Giancarlo said.

© Reuters. Bank of England press conference

"It is time to pull out a fresh sheet of paper and draw up the right arrangement between the EU and a post-Brexit London."

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.