EU seeks post-Brexit powers over London finance hub
The EU unveiled plans yesterday to give itself new powers over London’s banking business after Brexit in a blow to the city’s supremacy as a global financial hub. The draft law unveiled by European Commission vice-president Valdis Dombrovskis will empower Europe to decide if post-Brexit London has the right to host financial market “clearing houses” that deal in euros, the EU’s single currency.
Clearing houses are a key part of the financial system’s plumbing, with trillions of euros being handled every year, mostly out of London. “As we face the departure of the largest EU financial centre, we need to make certain adjustments to our rules to ensure that our efforts remain on track,” Dombrovskis said in a statement. The draft law is weaker than the forced relocation of euro clearing initially feared by London, in a sign that the EU does not want to overtly offend Britain only days after Prime Minister Theresa May embarrassingly lost her majority in British elections.
The issue of whether euro clearing houses can remain in the British capital is set to be one of the most contentious issues when Britain negotiates its future trade relationship with the EU after its departure. Britain has jealously guarded dominance of the clearing house sector in Europe and won an EU court decision in 2015 against the European Central Bank in order to keep hosting the euro deals.
Still, under the draft law, vaunted financial firms such as the London Stock Exchange stand at risk of a forced move of their euro clearing business to a bloc country. “We are giving ESMA more powers to regulate European counter parties,” an EU official said, in reference to the Parisbased European Securities and Markets Authority. With the proposal, “the door remains open to the forced relocation” of clearing houses considered at risk of causing severe damage to the EU economy, another source said. — AFP