European Central Bank president Mario Draghi has revealed his concerns over losing oversight of UK-based euro clearing.
In a letter to an MEP, Draghi also said he welcomed the European Commission’s consultation on clearing houses, in which it is considering new location policies.
He said that the current European Market Infrastructure Regulation (EMIR) regime offers the ECB “broadly appropriate guarantees for the oversight” of EU-based clearing houses, also known as central counterparties (CCPs).
“In a post-Brexit environment, UK financial market infrastructures (FMIs) would be considered as third-country FMIs rather than EU entities,” he said in a letter to Sylvie Goulard MEP.
“This could lead to a reduction in the level of supervision and oversight of UK CCPs by the EU authorities, including the ECB as central bank of issue of the euro.
“The ECB welcomes the fact that the European Commission will soon present legislative proposals to ensure the safety and soundness of CCPs that are of systemic relevance for financial markets across the European Union.”
The European Commission is consulting on proposals for changes to EMIR, which include increasing supervisory powers or forcing firms that clear euro-denominated derivatives to be located within the EU.
This would have a big impact on London, which is due to leave the EU because of Brexit and dominates the euro clearing market.