London Stock Exchange boss Xavier Rolet has warned of the damage the EU would inflict on itself if it makes a grab for the City’s lucrative euro clearing market.
Rolet also said Europe “has not been competitive for decades, or at least has lost the edge in terms of competitiveness”.
And he suggested countries such as China, India and the US as presenting the “biggest opportunities” for UK growth after Brexit.
The European Commission is currently consulting on proposed rule changes in relation to the clearing of euro-denominated derivatives, a market that is dominated by the City and the London Stock Exchange Group’s clearing house. Options on the table include forcing clearing houses to relocate euro clearing activities into the EU and, more favourably to Rolet, enhancing EU supervision outside of the area.
Rolet said he has been encouraged by noises made by the European Commission, but fears how much influence national politicians could make, acknowledging that there is an “immediate political appeal” to make protectionist statements. A number of politicians, mainly in France and Germany, have suggested euro clearing activity should be shifted from London to the EU after Brexit.
“There is always a deep cost to protectionism,” Rolet said at the City Week in London this morning. “But if you protect, you fragment, you isolate, you stall… you end up being less connected. The cost to consumers… rises, and in the end business goes away.”
Rolet said he had been “quite reassured by the balance and constructiveness of the commission, but that might not necessarily be the language you hear from national capitals, because they’re [asking themselves] ‘what can we grab in that environment?’”
He added: “The real issue here is: you want the euro to be a global currency, a reserve currency? And yet you want to fragment it? You want to mandate [euro clearing] inside the EU?”
On Brexit negotiations, Rolet said: “London, and the UK in general, has a big card to play, and it is its global expertise and connectivity.”
- Also speaking at the event, Aberdeen Asset Management boss Martin Gilbert warned that his firm would need to move a “handful” of positions into the EU if euro clearing activity is wrenched from London.