Deutsche Bank has moved a “large part” of its euro clearing activity to Frankfurt from London in a boost to the efforts of the eurozone’s top financial centre to lure business away from the City before Brexit.
Germany’s biggest bank said its decision would not affect jobs because it would simply involve pushing a different button to route clearing to Eurex, the clearing division of the German exchange Deutsche Börse.
However, the change, confirmed by a spokesman and first reported by the Financial Times, will be seen as a victory in Deutsche Börse’s campaign to grab a larger slice of the euro clearing market.
Clearing, seen as a vital pillar of financial stability, is dominated by the City of London, where about €1tn (£890bn) of transactions are cleared every day.
The London Stock Exchange, which owns the London-based LCH clearing house, has warned that the loss of euro clearing could cost the City 100,000 jobs. Its shares had fallen by more than 1% in early trading in the wake of Deutsche Bank’s announcement.
A spokeswoman for Eurex said it had a market share of 8% of euro clearing, up from virtually zero a year ago.
Hubertus Väth, the chief executive of the marketing group Frankfurt Main Finance, told the FT that moving euro clearing from London to Frankfurt was “on top of our priority list from the very first day after the Brexit referendum”.
Clearing houses act as an intermediary and guarantor between firms that buy and sell financial instruments such as interest rate swaps.
London hosted about 70% of euro transaction clearing as of 2013, according to the Bank for International Settlements.
For eurozone members, London’s dominance in euro clearing is a long-running bugbear.
In 2015, the UK government won a legal case against the European Central Bank, which had demanded that clearing houses should be based in the eurozone if they handled euro-dominated trades.
In preparation for Brexit, Brussels has proposed ideas that could give the EU more responsibility for regulating foreign clearing houses.
The former Bank of England deputy governor Charlie Bean told a House of Lords committee in 2016 he had “absolutely no doubt at all” that London would lose euro clearing after Brexit.
