‘Euro clearing firms moving accounts to Frankfurt’
EURO clearing businesses are already moving accounts to Frankfurt just days after the EU released proposals that could force operators to leave London as a result of Brexit, the head of the German city’s lobby group has said.
Hubertus Vath, the managing director of Frankfurt Main Finance, told the Press Association that he has seen commitment to Frankfurt “speeding up” after the European Commission put forward legislative reforms that would impose stricter supervision of the bloc’s derivatives market after Brexit.
“We see a significant rise in the account openings of Eurex Clearing, we see a lot of actors that are doing test trades.”
Eurex is owned by Deutsche Borse and is Germany’s equivalent to the London Stock Exchange’s LCH, which conducts the vast majority of euro denominated clearing.
He added that “some of the big actors have already committed themselves to move their clearing business”. including German house KfW.
It is the first sign that London’s hold on the multi-billion pound euro clearing market in derivatives, which settles business and trade conducted in the EU currency, is starting to slip.
An independent report conducted by EY for the London Stock Exchange (LSE) last autumn said up to 83,000 British clearing jobs could be lost over the next seven years if euro-denominated clearing leaves London.
LSE boss Xavier Rolet also warned last month that businesses would face £87.5bn in extra costs over five years if euro clearing leaves the City, as the industry would lose out on efficiencies that he claimed saved customers £16.4bn in capital last year.
But Mr Vath said those calculations were “hugely over exaggerated,” and that the likely impact on the market “would be less than 10% of what the LSE is calculating”, before accounting for “opportunities” that would offset any extra costs.
He said comments like those made by Mr Rolet are “not particularly helpful” ahead of Brexit talks, which begin today.
“It doesn’t help in mutual trust during the negotiations process if right at the very beginning somebody throws around figures which are obviously serving only one purpose – and that is to make one side’s point,” Mr Vath said.
He added: “We don’t want to have any destructiveness coming out from those negotiations.”
The City of London Corporation and financial services lobby group TheCityUK have also claimed that the UK is the only place that can guarantee financial stability for the euro clearing industry, but the Frankfurt Main Finance chief says Germany is well equipped for the challenge.