LONDON (Reuters) – Britain will resist “very firmly” any European Union attempts to arm-twist banks into shifting trillions of euros in derivatives clearing from Britain to the bloc after Brexit, Bank of England Governor Andrew Bailey said on Wednesday.
Europe’s top banks are being asked to justify why they should not have to shift clearing of euro-denominated derivatives from London to the EU, a document seen by Reuters on Tuesday showed.
Trading in EU shares and derivatives has already left Britain for the continent after the UK’s full departure from the bloc’s single market on Dec. 31.
The EU is now targetting clearing which is dominated by the London Stock Exchange’s LCH arm.
“It would be very controversial in my view, because legislating extra-territorially is controversial anyway and obviously of dubious legality, frankly, …” Bailey told lawmakers in Britain’s parliament on Wednesday.
Some 75% of euro clearing positions at clearing house LCH are not held by EU counterparties and the EU should not be targetting them, Bailey said.
“I have to say to you quite bluntly that that would be highly controversial and I have to say that that would be something that we would, I think, have to and want to resist very firmly,” he said.
Brussels has given LCH permission to continue clearing euro trades for EU firms until mid-2022, providing time for banks to shift positions from London to the bloc.
(Reporting by David Milliken and Alistair Smout; Writing by William Schomberg; Editing by Huw Jones)
