The uprooting of London’s treasured euro clearing market would be “vastly damaging and potentially destabilising”, the City of London Corporation has warned.
Catherine McGuinness, the corporation’s policy chairman, said the move would go against the interests of Europe and the global financial system.
She was speaking at a time when the European Commission is considering whether to try and force firms to relocate euro derivatives clearing activity from London – which dominates the market – to within the EU.
The prospect of clearing relocation has been widely condemned in the City, and has also drawn criticism from the US Commodity Futures Trading Commission.
“All the evidence points one way: that the mass uprooting and offshoring of part of the industry – of clearing of transactions in one currency – would not only be vastly complicated, but also vastly damaging and potentially destabilising,” McGuinness said at a Futures Industry Association conference in London today.
She also pointed out that clients choose to clear euros in London, which handles more than 75 per cent of the daily market.
“We have the infrastructure. And we have the people – the expert clearing professionals themselves, but also the ancillary professionals, such as lawyers, consultants and accountants who make it all happen. Clearing is here for these reasons,” she said.
“And if we split off one currency, with euro clearing moving to, say, Paris, all we’ll see is systemic risk going up, liquidity going down, costs hitting the roof and, according to Xavier Rolet of the London Stock Exchange, a cost to banks of $77bn (£60bn) in additional collateral.”
McGuinness added: “And what’s more, it’d be a step away from the ultimate goal, which should always be ‘what is in the interest of Europe’. And indeed in the interest of the global financial system – which is why for example the Commodity Futures Trading Commission is watching this issue closely.”