Francois Hollande, the French President, has warned London that it will no longer be the centre of euro-denominated clearing following the Brexit vote, dealing a blow to one of the City’s biggest markets and casting further doubt on the London Stock Exchange’s merger plans.
Mr Hollande, speaking after a tense meeting of European Union leaders last night, said that if the UK abandoned the EU’s pillars of free movement of goods, capital, workers and services, “you lose the advantages that come with it”.
“The City, which could make its clearing operations in euro, won’t be able to do so any more,” he said.
“The UK has said it doesn’t want any more freedom of movement. Now it won’t have access to the single market any more.”
David Cameron is in Brussels to discuss the next steps in the UK’s exit
European regulators have been angling to bring euro clearing into the currency bloc, rather than have deals processed from London.
The head of Germany’s market regulator Bafin has also expressed doubts about euro clearing staying put.
The UK won a court ruling last year that protected the City’s right to clear euro trades, safeguarding a market that processes trillions of euros in daily currency and derivatives deals, in the face of protests from the European Central Bank.
The London Stock Exchange’s clearing house LCH.Clearnet continues to process euro trades from the UK, acting as the middleman between buyers and sellers, but this position is now uncertain.
LCH.Clearnet is a key plank in the London exchange’s plans to merge with Germany’s Deutsche Boerse, in a £20bn deal announced in March.
LSE investors will vote on the deal on Monday, July 4.
The transaction also needs approval from around 40 global competition authorities. Bosses on both sides have claimed the merger makes sense even without the UK’s membership of the European Union.
Meanwhile, the European Banking Authority is preparing to leave London and move to Frankfurt or Paris following the surprising referendum result.
Source: telegraph