Clearing, a pawn in the post-Brexit battle for London’s financial services industry, may not necessarily be up for grabs after all, says U.K. Chancellor of the Exchequer Philip Hammond.
“It’s by no means clear to me that the rules of the single market, even after Britain has left, would permit the ECB to require euro-denominated instruments to be cleared inside the euro zone,” Hammond said today in a Bloomberg Television interview in New York. “If the ECB was minded to try to its hand, as it were, to try again, to dictate how euro-denominated clearing takes place, that would be a legal process that would take time. I think that’s some way down the line.”
Most interest-rate swaps trading and clearing in the common euro currency takes place in the U.K., which for years has made the European Central Bank uneasy. Hammond’s predecessor, George Osborne, fought to protect that business and won.
Clearing is under fresh scrutiny after Britons voted to leave the European Union in June -- officials in France and Germany have targeted euro clearing as an industry that belongs in the bloc.
Hammond noted other EU countries that also clear euro derivatives and are entitled to single-market protections. For example, euro interest-rate swaps are traded in Sweden, which is part of the EU but doesn’t use the common currency.
To contact the reporters on this story: John Detrixhe in London at jdetrixhe1@bloomberg.net, John Micklethwait in New York at micklethwait@bloomberg.net. To contact the editors responsible for this story: Trista Kelley at tkelley2@bloomberg.net.
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