06 July 2017

Bloomberg: City chiefs concede UK can lose clearing oversight in Brexit

[...] "If the price is shared regulatory oversight, then it is a price worth accepting," John McFarlane, the chairman of Barclays Plc, said in a Bloomberg Television interview. Given the systemic importance to the continent, it is “not unreasonable” that EU authorities should be granted “some form of oversight” of euro-related activities within the U.K., he said.

“There is absolutely no other option possible whatsoever, for countries to get along and agree on an organized prudential financial regulatory framework,” Xavier Rolet, Chief Executive Officer of London Stock Exchange Group Plc, which owns LCH Clearnet Group Ltd., said at a conference Thursday. “The current period of seeming increased fragmentation will in fact end up with more integrated financial regulation.”

The tone from these executives contrasts with Britain’s Conservative government, where most lawmakers are vowing to resist scenarios where EU institutions would maintain jurisdiction over anything post-Brexit. Clearing euro-denominated contracts has emerged as a key battleground, with French and some German leaders adamant it must return to the Continent from Britain, but shared oversight could be less disruptive for the financial system than splitting up Europe’s dominant clearinghouse.

Bank executives and central bankers including Mark Carney have warned that could disrupt financial stability and impose financial burdens on EU-based companies. The business has been concentrated in London because it is more efficient for banks to hold all their swaps in one place. Clearinghouses collect collateral and stand between traders to prevent a default from spiraling out of control, and their role has become far more entrenched since the 2008 financial crisis. [...]

Full piece on Bloomberg

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