BRITAIN will today sue the European Central Bank (ECB) over new rules that will force the City’s biggest clearing house, LCH.Clearnet, to relocate to the Eurozone.
The move highlights growing impatience among Whitehall officials and politicians, who believe Brussels is using new regulation as a smokescreen to undermine London’s pre-eminence as a global financial centre.
Under new rules unveiled by the ECB in July, clearing houses must be based in the Eurozone if they hold more than five per cent of any one euro-denominated market, including over-the-counter (OTC) derivatives. London is home to around 40 per cent of OTC derivate trading.
Such a rule would force LCH.Clearnet – one of the largest clearing houses in the world – to relocate huge parts of its business to a financial centre within the Eurozone, such as Paris or Frankfurt, costing hundreds of London jobs.
According to the ECB policy paper, clearing houses that exceed the five per cent threshold must be “legally incorporated in the euro area with full managerial and operational control and responsibility over all core functions exercised from within the euro area”.
One Whitehall official told City A.M.: “This sets a dangerous precedent and has serious implications for the City’s competitiveness. The general feeling is that this is our ‘enough’s enough’ moment.”
Britain is expected to file the lawsuit today at the European Court of Justice (ECJ), marking the first time a member state has taken legal proceedings against the ECB.
Although Britain will fight the case on the grounds that it undermines the single market, the unprecedented move represents part of a wider assault against the deluge of anti-City regulation that is coming out of Brussels.
Some officials fear that France and Germany are trying to win business for their own financial centres by changing the regulatory goal-posts in the name of financial stability.
A Treasury spokesman said: “This decision contravenes European law and fundamental single market principles by preventing the clearing of some financial products outside the Euro area. That is why we have begun proceedings against the ECB through the ECJ.
“[We] want to see this resolved swiftly and without involving the courts, but if necessary will not shy away from continuing legal action to make sure there is a level playing field across the EU for British businesses.”