ECB steps up euro clearing power grab

Central bank seeks extra legal powers to strengthen its position to control the City’s flagship business

THE European Central Bank has stepped up the battle for control over London’s lucrative euro clearing market after Brexit, asking for extra legal powers to oversee the market.

The ECB has asked to change its statute in a move that would grant it “clear legal competence in the area of central clearing”, one of London’s flagship businesses.

It means that the ECB would have extra powers to monitor any risks that might affect monetary policy or the stability of the euro.

At the moment, the vast majority of euro derivatives are cleared in London. Uk-based clearing houses, including the London Stock Exchange’s LCH, are regulated by the Bank of England.

If accepted by the European Parliament, the revised statute would say that the ECB and national central banks “may provide facilities, and the ECB may make regulations, to ensure efficient and sound clearing and payment systems, and clearing systems for financial instruments, within the Union and with other countries”.

The bank’s request follows a string of reforms published by the European Commission last week that called for Brussels to have the ability to force “systemically important” clearing houses to operate within the EU.

Bank of England Governor Mark Carney, however, is keen for London to retain its status as a clearing hub, and warned on Monday that such a move would be in “no one’s economic interest” and could damage financial stability by fragmenting the market.

The Governor has argued that Brussels’ concerns could be solved through

“common standards and co-operative oversight”.

His views were not shared by ECB board member Benoît Coeuré, however, who on the same day said that the EU’S clearing regime was “never designed to cope” with major clearing houses operating outside of the bloc.

The ECB’S move yesterday was backed by the Austrian chancellor, Christian Kern, who said that the ECB “has saved Europe” with its recent bank rationalisations and easy-money policies so “it makes a lot of sense to give them more means to do the job”.

The ECB only emerged from a legal battle with Britain over where clearing houses should be based two years ago.

The UK won its case against the ECB to retain the bulk of the market in 2015, by arguing that it could not be discriminated against as a member of the single market. European leaders believe that Britain’s departure from the single market after March 2019 removes that argument.

The issue of euro clearing has become a hot topic in the Brexit debate, amid fears that thousands of related jobs could be lost in the City if clearing houses are forced to move to the continent.