LONDON — A prominent ally of German Chancellor Angela Merkel says that London should be stripped of euro clearing — a €930 billion (£792 billion, $US995 billion) daily business — after Brexit.
The acceptance of English law and widespread use of English language has made London a hub for clearing globally, and it handles more than 70% of the daily euro clearing business, equivalent to around €930 billion of trades per day, according to a House of Lords report.
However, Manfred Weber, a Member of the European Parliament, told reporters in Strasbourg on Tuesday that Britain must give up the right to clear euros once it leaves the European Union.
“EU citizens decide on their own money. When the UK is leaving the European Union it is not thinkable that at the end the whole euro business is managed in London. This is an external place, this is not an EU place any more. The euro business should be managed on EU soil,” he said.
“I have the obvious interest that places like Amsterdam, Paris, Dublin and Frankfurt can win and others will lose. It will not be a positive thing for the City of London at the end.”
Clearing houses such as LCH ICE Clear Europe in London manage credit risk, acting as a middle-man in swaps and derivatives trades to guarantee the contract in the event that one of the parties involved in the trade goes bust.
European policymakers have argued that euro clearing should take place within the euro area. Britain has repeatedly had to defend its right to clear euro trades, given that it does not have the euro.
If Britain is stripped of its clearing rights, then around 100,000 positions could be lost, said the head of the London Stock Exchange, Xavier Rolet, six months ago.
In 2015, the UK won a court battle to continue clearing in London. France has repeatedly signalled that it wants to steal the business from London. President Francois Hollande said Britain could not retain its key clearing role shortly after the June 23 referendum. Paris, London’s nearest rival for clearing, handles 11% of all euro trades.
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