EU for relocating London euro clearing houses

Dhaka,  Thu,  21 September 2017
Published : 13 Jun 2017, 13:15:45

EU for relocating London euro clearing houses

EU for relocating London euro clearing houses
The European Commission is set to announce that it wants a new system to vet whether, and under what conditions, non-EU clearing houses should be allowed to handle large volumes of euro-denominated business, says a global media report Tuesday.

The plans are a direct response to concerns in Paris and some other capitals about London maintaining a post-Brexit role as a pillar of EU securities and derivatives markets, when it will no longer be covered by the bloc’s rules.

London’s euro-clearing business is a critical part of its financial services sector and can top a notional $900bn a day. Clearing houses stand between parties in a financial market trade, insulating other participants from the impact of any default.

Brexit “implies significant challenges for safeguarding financial stability in the EU”, according to the draft commission proposal. It means a “distinct shift” in the proportion of euro-denominated derivatives transactions taking place “outside the EU’s jurisdiction”.

The commission’s proposal says the European Securities and Markets Authority, an EU agency based in Paris, could agree with relevant EU central banks that a particular clearing house has “specifically substantial systemic significance” to the financial system.

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