The EU is scheduled to unveil new rules for the financial sector that could result in a huge slice of London’s banking business leaving after Brexit. It would be a severe blow to London’s role as a financial hub.If confirmed by Brussels later on Tuesday, the new rules could deny post-Brexit London the right to host financial market clearing houses that deal in euros, the eurozone’s single currency.
Clearing houses are a key part of London’s financial operations, with trillions of euros being handled every year.
The issue of whether the euro clearing business can remain in the British capital is set to be one of the most contentious issues when the UK negotiates its future trade relationship with the EU.
Brussels said last month it was exploring several options including the possibility of Britain keeping its euro clearing, while accepting strict EU oversight. But experts fear that this oversight might be so tough that many clearing houses would still want to relocate to EU member countries.
Bitter fight ahead
The London Stock Exchange has bitterly objected to any such relocation activities. “It’s going to be complete chaos,” LSE Chief Executive Xavier Rolet told reporters. “This has not been properly thought through.”
Rolet argued a forced relocation of euro clearing to the EU would require a near doubling of the $83 billion (74 billion euros) that finance companies set aside for contract defaults. European financial experts say this figure is exaggerated.
But London lobbyists insist that an EU-ordered exile from Britain would only benefit Wall Street or Asia. “Forcing a move out of London would ultimately be detrimental and is in no one’s interest,” TheCityUK CEO Miles Celic said in a statement.
hg/jd (AFP, Reuters)
