Andrew Bailey speaks during a hearing with U.K. lawmakers; Bank of England governor says EU moving to ‘location policy’
Bank of England Governor Andrew Bailey warned the European Union
against demanding that euro derivatives are settled by clearinghouses
inside the bloc, saying such a move would be a “very serious escalation”
and that it would draw a U.K. response.
The EU appears to be moving towards a policy of insisting such trades are located in the bloc, Bailey said during a hearing with U.K. lawmakers on Wednesday.
A
so-called location policy of forcing banks and dealers to move clearing
business to the EU would be “very controversial,” Bailey said. “I have
to say that that would be something we would have to, and want to,
resist very firmly.”
His comments -- his strongest yet -- are a mark of the
post-Brexit tensions and Britain’s growing frustration about the EU’s
reluctance to grant so-called equivalence rulings that would enable
London-based finance firms to operate in the bloc.
The
lack of an agreement has put London’s decades-long dominance of
European finance under threat. This year, the Square Mile lost its crown
to Amsterdam as Europe’s top place to buy and sell stock while traders
have shifted some interest-rate swaps out of the U.K.
The London Stock Exchange Group Plc’s clearinghouse in London
is the dominant location for euro derivatives and the EU has allowed it
to continue handling trades for European clients through June 2022. The
European Commission, the EU’s executive arm, is pressing banks and
other traders to shift more euro-denominated business to the bloc....
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