EU trails behind while Brexit Britain’s City of London roars

EU unimpressed over Liz Truss’s post-Brexit threats

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

This week the EU revealed it would extend access to London’s clearinghouses for a further three years in a major boost for the City. A spokesperson for the bloc’s commissioner for financial stability Mairead McGuinness said: “We are now consulting member states on this draft equivalence decision, which will take the form of an implementing act. We envisage to propose an extension of the equivalence decision of three years – until end June 2025.” Barney Reynolds, Global Head of the Financial Services Industry Group at Shearman and Sterling, told Express.co.uk he wasn’t surprised by the decision.

European firms are currently heavily reliant on London to process their transactions. London Stock Exchange Group’s clearing arm LCH clears around 90 trillion euros worth of interest rate swaps alone, accounting for 90 percent of the total. Since Brexit, access has been maintained on a temporary basis to help support European banks reliant on these services. With the previous agreement expected to end in June 2022 pressure had grown for a longer time period to adjust.

Brussels has increasingly tried to move European banks away from this reliance though, but with little success.

Ms McGuinness has said she will be launching a public consultation on measures to make the EU more attractive as a clearing hub with banks previously suggesting they would choose New York if access to London ended.

Mr Reynolds explained it didn’t make sense for the EU to try to grab business by building its own capacity, adding that trying to move clearing to the EU would be very expensive and exacerbate risk to the EU and Eurozone.

“Having this in London is safe and more managed,” he explained.

He claimed the EU was currently in a “transitional phase”, and the EU’s argument that clearing business deserved to be with the EU was at odds with its ability to manage safely the inherent problems of the Eurozone.

According to Mr Reynolds, the EU is currently “betwixt and between”, with the bloc needing to decide whether it becomes a country, raising and sharing money at a federal level like the US, or whether it should unwind to become a collection of trading states.

Mr Reynolds predicted it was very unlikely the EU would be able to solve the issues standing in the way of moving clearing activity to the EU within the next three years, with the likelihood being there would be another extension.

Were clearing activity to move to the EU, it would likely be unpopular with EU businesses, because of the exorbitant expense that would arise, which could become even worse, with Mr Reynolds suggesting there was also the possibility of the EU trying to apply a transaction tax to cleared trades.

DON’T MISS: 
Bank of England under ‘great pressure’ as inflation spikes [SPOTLIGHT]
Oil prices surge after Turkish pipeline explosion [LATEST]
Wetherspoon’s blasts Downing Street party [REACTION]

EU banks have previously suggested they could move clearing activity to New York if access to London clearing houses comes to an end.

Mr Reynolds explained the EU continues to recognise US clearinghouses, and has not taken the politicised view of the US that it takes of the UK.

However, there would also be considerably inefficiencies with moving business to the US.

Source: Read Full Article