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EU proposals take control of London’s euroclearing operations – Hayes

EU proposals take control of London’s euroclearing operations – Hayes

Brian Hayes MEP today (Wednesday) said that new proposals published by the European Commission give EU authorities huge control over London’s lucrative euroclearing institutions (Central Counterparty Clearing house (CCP)).

14-10-22 Brian Hayes portrait STR-6

“The new set of proposals are a bombshell in the context of the current Brexit negotiations. Euro clearing activity is dominated by London, primarily due to the strong EU securities and derivatives market in the city of London.

“With these new proposals, the UK will now longer be able to ensure that euro clearing activity stays in London post-Brexit.

“While it was previously expected that the legislative proposals would require an automatic relocation of all euro clearing houses to Eurozone territory, the Commission has not gone to that extreme. That is a good thing because this would have been seen as the nuclear option by the British.

“We now have a set of proposals that are a good basis for negotiations. There is a long way to go and substantial changes could still be made. The proposals will be scrutinised and amended by the European Parliament and European Council before a final vote. Obviously, the UK will try to influence these negotiations as much as possible.

“There needs to be a cooperative line of communication between both sides. There should be acknowledgement from the British side that all euro clearing operations cannot be done in a non-EU Member States. Equally, there should be recognition on the EU side that London has built up a strong euro clearing infrastructure over almost 20 years and this cannot simply be taken apart in one fell swoop.

“Under the proposals, the EU would allow for third countries to conduct euro clearing operations, however, discretionary power would be given to the European Securities and Markets Authority (ESMA) and central banks to recommend that certain clearing houses are of ‘substantial systemic significance’ and should be moved to the Eurozone. The Commission would have the final say on any clearing house relocation.

“While Ireland does not have a highly developed securities and derivatives market, we could benefit from a major relocation of clearing houses to the Eurozone. In that scenario, there is potential for financial services firms that depend on clearing houses to move their operations to Eurozone locations – this could certainly boost our financial services industry.

“There’s no doubt that this will become a major point of tension in the Brexit negotiations. Some voices in Germany and France are already vying for the euro clearing business. But we need Irish voices involved in these discussions arguing for constructive negotiations.”

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