UK’s euro clearing access to EU requires careful analysis post Brexit: ECB official

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imageEconomy14 hours ago (Sep 02, 2020 05:40AM ET)

(C) Reuters. Specialists work on a crane in front of the European Central Bank (ECB) in Frankfurt

By Huw Jones

LONDON(Reuters) – Detailed analysis is needed before the European Union can decide on long-term access for the London Stock Exchange (L:LSE) to clear euro denominated derivatives for customers in the bloc, a European Central Bank official said on Wednesday.

The LSE dominates euro derivatives clearing and EU policymakers have called for the activity to be relocated to the bloc given that Britain will no longer have to comply with EU rules after Dec. 31 when a post-Brexit transition period ends.

The EU’s executive, the European Commission, has said it will grant Britain “time limited” clearing access from January to allow the bloc to build up its own euro clearing capacity and avoid disrupting markets.

Klaus Loeber, a senior supervisor at the ECB, was being quizzed by members of the European Parliament on Wednesday about his appointment as chair of a new EU clearing committee that will advise the European Commission and directly supervise foreign clearing houses serving the bloc.

There was a need to look closely at longer term implications by taking into account the ability of EU firms to access global markets without undue costs and the role of sovereignty in EU markets, Loeber said.

“This requires analysis, very concretely of specific products, services, to see where there is a significant interest on the side of the EU to have a more direct influence.”

The LSE has already moved clearing of euro repurchase agreement or repo contracts from London to its Paris subsidiary, but the clearing of over 90% of euro interest rate swaps remains in London.

The EU has found itself in the “slightly unusual position” of having a major financial centre close by that is outside the euro zone and, from January, outside the direct influence of EU law, Loeber said.

“What is key for me is that there is clear analysis for the stability implications, both in regards to relocation and non-relocation, and to balance this with a clear strategy and a clearly communicated strategy,” Loeber said.

UK’s euro clearing access to EU requires careful analysis post Brexit: ECB official

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