HSBC boss Stuart Gulliver has warned the fragmentation of the euro clearing market could hit the “man on the street”.
The chief executive also predicted non-EU cities, such as New York and Hong Kong, could benefit from euro clearing relocation policy.
The European Commission last month laid out proposals for a euro clearing shake-up that set the scene for the London-dominated market to be uprooted and moved into the EU.
In the run-up to the proposals being made, the London Stock Exchange and others warned forced relocation of euro clearing could cost banks billions of pounds in extra collateral.
Banks have largely remained quiet on the topic. However, at the Europlace conference in Paris today, Gulliver spoke of how fragmentation will ramp up costs and negatively effect the economy.
“Fragmentation means less netting, higher initial margins, greater cost to the real economy,” he said.
“The cost of all of this is eventually translated through to companies and therefore to the man on the street, through the costs of goods and services.”
He added: “Remember all these central counterparties [clearing houses] are private institutions, they’re heavily regulated, they concentrate massive financial risk. So if euro clearing is moved here, that has a tremendous negative effect on the netting that can take place within a central counterparty, it increases significantly – probably by 20, 25 per cent – the initial margin, it increases the cost.”
He also suggested that if the commission requires euros to be cleared in the EU, “then logically dollars should be cleared in New York”.
“You start to get that fragmentation taking place,” he said.
“So I think it is quite likely that New York will be a beneficiary of this, I think it is quite likely that Hong Kong will be a beneficiary.”
Christian Noyer, honorary governor of the Banque de France, described London’s dominance of the euro clearing market as “really dangerous”, indicating something that something must change as a result of Brexit.
“The basic problem for the EU is financial stability,” he told the conference. “Can you totally rely on an offshore place where you have no regulatory power, no judiciary power… for the bulk of clearing? And a place where you have no access to central bank money? To me, this is really dangerous.”
Stephane Boujnah, chief executive of pan-European exchange Euronext, was also supportive of the European Commission proposals.
Speaking at the conference, Gulliver also confirmed that HSBC will move 1,000 jobs from the UK to Paris in the event of a so-called hard Brexit.
But he added he “strongly believe[s] that London will remain a very big financial centre”.