European Parliament members could push for stronger euro clearing reforms, with European Commission proposals set to come under the microscope next month.
The commission’s plans, put forward in early June, set the scene for the euro clearing activity to be uprooted from London, which currently dominates the market.
The proposed shake-up to the European Market Infrastructure Regulation (Emir) gives greater power to regulators, tightens up rules for “systemically important” clearing houses operating outside of the EU and opens the door for them to be forced into the bloc.
However, the European Parliament could push for more. “I fully expect there to be MEPs who push for euro-denominated clearing to be moved to the eurozone, but this sentiment is based purely on euronationalism rather than financial prudence,” London Tory MEP Syed Kamall told City A.M.
Those euronationalist MEPs who want euro clearing to be moved from the UK need to be honest with their voters and tell them it will lead to increase costs, resulting from the financial costs of installing new infrastructure and as well as the fact that it is often cheaper to clear in the UK where other currencies are also cleared.
Markus Ferber, a German MEP and vice chairman of the parliament’s Committee on Economic and Monetary Affairs, told the FT: “It is very likely that the European Parliament will ask for an even stronger regime than the one in the commission proposal.”
But Labour MEP Neena Gill said: “Many MEPs are aware of the huge costs that a relocation policy would have on the EU27, as well as the UK.
“So it is wrong to assume that the European Parliament will push for even tougher rules than proposed by the commission on UK-based euro clearing houses.”
She added: “The way to mitigate the worst possible effects of Brexit on the financial services for both sides is for the UK to retain similar access to euro clearing. In exchange, the UK must be willing to offer the ECB continued supervisory powers over the UK’s clearing houses.”