29 December 2017

François Villeroy de Galhau: Europe, France and the United Kingdom - facing our common economic challenges

[...]But preserving the interests of the EU, its citizens, its businesses, its Member States, means that the agreement with the UK should not undermine what we have managed to achieve in Europe in the economic field: one of our strongest assets is our single market; it removes all internal borders and regulatory obstacles to the free movement of goods, capital, services, and persons in the European Union. For the sake of consistency, there is one principle in particular to which we have to stick in preparing the agreement between the EU and the UK: in the single market, you cannot separate access and rules.

For the financial services industry, this means that you can hardly expect to obtain a European passport if you do not accept the single market's rules. London is and will remain in the future a global financial centre, but the architecture of the European financial system may have to evolve in this regard. We cannot foresee the outcome of the negotiations – which I hope will be in the interest of both parties – but all actors should as of now undertake all the necessary preparations to avoid any potential “cliffedge” risk. London will and should probably continue to attract and transform savings from all over the world. In this respect, on a more personal note, allow me to comment on what I read with surprise in some British newspapers last July: I personally never met with the City’s Special Representative to the EU, Mr Browne, and the Banque de France has never wished for Brexit to be detrimental to the City of London, and we have friendly and frequent contact with the City of London Corporation.

But, besides savings from the rest of the world, the savings of the EU-27 Member States will be increasingly handled within the single market, given its significant size and the safety of its rules. This means that we will move towards some degree of “Europeanisation” for wholesale banks, insurers and asset managers.

It is symmetrically the duty of Europe and its member countries to be business-friendly and attractive to the financial industry. We should not achieve this by lowering the bar for our common regulations: the SSM, EIOPA and ESMA are duly mobilised to prevent certain entities that keep their resources outside the EU from setting up empty shell corporations in the EU, mere company name plates, to benefit from passporting rights. We should rather be attractive by offering a stable and favourable framework for investors, including infrastructures, labour skills and labour laws, and taxes. There is some fair but positive emulation in this regard. In this new environment, the Paris financial centre has obvious advantages, building on the very welcome measures announced in July by our Prime Minister to strengthen Paris’ attractiveness. To name a few, France has the biggest investment banks in continental Europe, the largest asset management industry and is the leading private equity investor; and French universities are renowned worldwide for the excellence of their finance teaching. And, last but not least, Paris will have the privilege of welcoming the EBA.

Furthermore, the euro area has to keep control of the risks regarding its currency, the euro, and euro-based transactions. Some financial market infrastructures located in London, which are key for the EU, will soon become off-shore to the EU as a consequence of Brexit. This is particularly problematic when these infrastructures could put the EU’s financial stability at risk, as they represent 70% of the daily euro clearing business, equivalent to around EUR 930 billion (GBP 792 billion) in trades per day. This is the reason why the Commission proposed – and we support – a location policy for CCPs. Clearing activities in euro, for all those of “super-systemic” importance, must be located where the supervision of the Eurosystem can be exercised effectively. It is a matter of consistency for monetary policy and financial stability. 

Full speech

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