EU to punish banks using City of London to stop excessive dependence on Brexit Britain

Jacob Rees Mogg's new Brexit role pivotal to Boris Johnson

We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info

EU chiefs have insisted that a temporary deal allowing clearing business to trade through London will not be extended beyond 2025. Clearing houses act as middlemen in derivatives trades between banks and are a vital part of the financial system.

London’s square mile has an estimated £563trillion clearing market and is the leader in Europe for the practice – handling around 90 percent of euro interest rate derivatives.

The EU insisted after Brexit that banks based within the bloc would be shut out of London, with an initial cut-off date of January 2020.

This has been repeatedly pushed back owing to concerns about financial stability.

Now Eurocrats want firms based in the bloc to be able to clear trades themselves – ending what they call an “excessive dependence” on London’s world-renowned financial services.

Firms that fail to comply will face higher charges.

Mairead McGuinness, the European commissioner for financial services, announced the hardline approach as the EU launched a consultation on making the EU’s clearing houses more “attractive”.

She said: “The Commission plans to come forward with measures to reduce our excessive dependence on systemic third-country clearinghouses and to improve the attractiveness of EU-based clearing houses.”

But many financial commentators believe the move is unlikely to work.

Nicola Sturgeon’s Indy plan dismantled amid Barnett formula ‘mistake’ [ANALYSIS] 
Brexit LIVE: Boris slammed for refusing to ‘back winners’ in UK [REACTION] 
Boris Johnson LIVE: PM popularity in free fall as Labour opens up lead [INSIGHT]

Speaking to the Telegraph, Pauline Ashall, a partner at Linklaters, said the new measures proposed are “mostly stick rather than carrot”.

Michael McKee, a partner at law firm DLA Piper, said: “The EU is determined to be self-sufficient in key areas like clearing and the current French Presidency of the EU wants ‘a more sovereign Europe’ and ‘a new European model for growth’.

“Sovereignty with regard to clearing is part of that vision.

“However, the UK is likely to remain the dominant clearer of non-EU financial instruments within Europe.”

The news emerged shortly after French President Emmanuel Macron announced plans to try and woo bankers away from London.

Clement Beaune, France’s minister of European affairs, said a “clear signal” must be given to financiers to entice firms to the bloc.

Source: Read Full Article