Breaking News

UK's risk of losing euro clearing after Brexit eases

GlobalMay 16, 2018 18:54
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. European Commissioner for Regional Policy Huebner makes statements in Athens

By Huw Jones

LONDON (Reuters) - The threat of clearing in euro denominated financial contracts being forcibly moved from London to the European Union after Brexit eased on Wednesday after EU lawmakers backed more detailed economic tests for relocation.

The EU has proposed a draft law that instructs its regulators to check on "systemic" foreign clearing houses that handle large amounts of euro-denominated assets like interest rate swaps.

If a foreign clearing house's home regulator - the Bank of England in the case of Britain - failed to cooperate with EU supervisors, the bloc would require clearing for EU customers to relocate to the EU.

The draft law is seen by Britain as an attack on the City of London financial district where an arm of the London StockExchange (L:LSE) - LCH - clears the bulk of euro denominated assets. In the immediate aftermath of Britain's vote in 2016 to leave the EU then French President Francois Hollande said London should no longer be allowed to clear euro assets.

However, clearing industry officials say the issue is losing political heat as the technical complexity of shifting huge derivatives positions cross-border becomes better understood.

British regulators have signalled a willingness to cooperate with the EU on clearing after Brexit, saying they already do so with the United States.

The European Parliament's economic affairs committee voted by 45 to 4 in favour of the draft law with amendments to impose more detailed economic tests for relocating clearing operations.


The committee backed the need for the bloc's securities watchdog ESMA to examine the costs and benefits of forcing a foreign clearing house to obtain a licence in the EU, and to check if EU customers have viable substitutes to a foreign clearing house.

ESMA would also have to consider the consequences for the outstanding contracts at a foreign clearer, and whether relocation actually cuts systemic risk in the EU.

Parliament's centre right party said in a statement ahead of the ballot that it did not want to require British-based clearing houses to relocate to the EU.

It does, however, want EU regulatory power over non-EU clearing houses if they clear transactions in euros.

"If you want to do business in euros you have to accept that there will be a referee from the European Union, a real referee who has the power to send you off the pitch," said Danuta Huebner, the centre-right lawmaker who is steering the draft law through parliament.

Denying a non-EU clearing house the ability to serve customers in the bloc should remain in the draft law as an "insurance mechanism" in case supervisory cooperation does not work, Huebner said.

LCH and the Bank of England have warned that forced relocation would mean fragmenting markets in Europe, bumping up costs and potentially seeing the activity shift to New York.

Rival Deutsche Boerse (DE:DB1Gn) has sweetened its euro clearing service in an attempt to win a quarter of the lucrative business from LCH in London. Once EU states have agreed their own position on the draft law after the summer, they will sit down with parliament to thrash out a final version that becomes law.

UK's risk of losing euro clearing after Brexit eases

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email