Brussels makes £69trn power grab of UK business – Outraged UK tells EU chiefs to back off
The EU wants to end Britain’s dominance over the hugely profitable clearing of derivatives contracts for global businesses. Eurocrats and the bloc’s leaders have long wanted to seize control of a bigger chunk of one of the City’s most prized asset in the wake of Brexit. Five years after our vote to leave, Britain still controls 90 percent of euro-denominated swaps clearing, a massive concern for Brussels and other finance hubs on the Continent.
An EU official told the FT: “We are facing a reality – the current concentration is clearly unsustainable.”
EU nations have long wanted to bolster their capacities to handle the clearing operations within the Eurozone.
They are also concerned the City maintains a tight grip on the industry at a point when Britain’s financial regulations begin diverging from the bloc’s rulebook.
Swaps are used by firms looking to protect themselves against unfavourable changes in interest rates.
Brexit has seen a reshuffle in global trading of euro swaps, with business moving out of the capital to EU finance hubs, such as Paris and Amsterdam, as well as to Wall Street.
But UK-based ICE Clear Europe and London Stock Exchange Group’s LCH have kept a stranglehold on clearing – another lucrative financial market.
They play a key role as a middleman between buyers and sellers, guarding against defaults that could spark a chain reaction across the whole market.
Brussels doesn’t want to leave itself reliant on UK market supervisors making correct choices for Europe in event of a clearing house crisis.
EU diplomats and officials also recognise the concerns are driven by European financial centres wanting to snatch the business away from London.
Top eurocrat Mairead McGuinness earlier this month described the volumes cleared in the City as “eye-watering”.