City to fight EU bid to grab £750bn-a-day business
THE CITY is preparing to resist an attempt by Brussels to steal its £750billion-a-day currency business.
London was told by the European Commission yesterday that it could – for now – remain the euro trading hub after Brexit.
But it is demanding a greater say in regulating the business. EU officials warned of a forced relocation if they felt London’s trading floors did not meet the same standards as in the eurozone.
Many in the City fear Brussels is setting in place the framework to seize hold of a currency market that supports as many as 232,000 jobs and has been enviously eyed by France and Germany for years. They said any upheaval could be catastrophic for Europe’s banks and economies.
Miles Celic, of TheCityUK lobby group, said: ‘While these proposals appear to fall short of the worst case scenario, the European Commission is holding back any real detail on when or how it might pull the trigger on a location policy.
‘Despite the Commission recognising the costs that a clearing location policy would pass on to European savers and businesses, it appears politically committed to exploring this further. This kind of currency nationalism is likely lead to less competition, higher costs and market fragmentation.’
Catherine McGuinness, of the City of London Corporation, said: ‘London is the unparalleled leader when it comes to clearing. The EU is simply not equipped to handle the volume of clearing that the UK does each day. In taking steps to shift power away from UK clearing houses, the EU could damage itself unnecessarily.
‘The UK is the only place that can guarantee financial stability with the lowest possible cost implications.’
Clearing houses developed after the financial crisis and stand between buyers and sellers in trades, guaranteeing that the money is paid if one side defaults. They play a vital role in the financial system by taking on risk. The City has developed a world-leading role in handling everything from euros to Mexican pesos.
EU officials said there were growing concerns that Brexit would leave the EU powerless to enforce rules upon London and leave the bloc exposed to additional financial risks. An insider said: ‘Once the UK leaves the legal framework has disappeared so we need to look at this very, very closely.’ Another warned: ‘You can’t just operate behind a brass plaque in Amsterdam.’
Officials refused to say whether the new rules would require any London clearing houses to move, insisting this was a decision for regulators in the future.