UK should ‘resist’ EU trade transfer, says BoE governor

Bank of England (BoE) governor Andrew Bailey has warned that the UK should “resist firmly” any attempts made by the EU to transfer euro derivative clearing from Britain to elsewhere in Europe.

At a Commons Treasury committee meeting on Wednesday, Bailey said that the London Stock Exchange’s LCH clearing house currently manages an “eye watering” €83.5 trillion.

The BoE governor’s comments come as speculation grows about the EU potentially demanding more financial business moves from London to other European cities now that Britain has left the union.

But he said that forcing the movement of euro derivatives clearing away from the UK would be a “serious escalation.”

Bailey warned that a move like this would require “highly controversial” actions like an attempt at “extraterritorial legislation” or forcing banks and dealers to “say there will be some other penalty for you unless you move this clearing activity into the eurozone.”

Prime minister Boris Johnson’s Brexit deal did not include any agreement on the financial services market.

But the UK has been granted temporary equivalence in clearing by the EU, which enables London to continue business as usual for the next 18 months.

However, when the equivalence is dropped, 25 per cent of the euro derivative clearing could shift to the EU.

Earlier this month Amsterdam took over London as the top share trading centre in Europe.

The Dutch city saw its post-Brexit average daily trading increase from €2.6 billion to €9.2 billion in January.

London came in second place, experiencing a significant drop from €17.5 billion to €8.6 billion daily trading in the same period, according to data from the CBOE exchange.

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