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Germany’s largest lender said that its overall risk exposure to euro-denominated derivatives cleared in Frankfurt in recent months had risen to roughly the same level as those cleared in London. Deutsche Bank does not disclose its clearing volumes but says it is one of the five largest clearers of interest derivatives.
The move has provided a significant boost to Deutsche Börse’s ambition to steal business from LCH after Britain leaves the EU in March next year — six months ago, Deutsche Bank’s euro clearing operation was almost entirely done in London.
The clearing of euro-denominated interest rate derivatives has become a key Brexit battleground for regulators, banks and exchanges. In the past, London’s LCH was the undisputed leader for clearing euro-denominated interest rate swaps, processing up to €1tn of notional deals a day.
“To minimise risk for financial stability, it is indispensable that [the clearing of euro-derivatives] is subject to strong regulation and supervision in full conformity with EU standards,” said Olaf Scholz, German finance minister, last month, suggesting Frankfurt would be the natural place.
Deutsche Bank has been one of the early adopters of Frankfurt-based clearing. “Our outright risk positions at LCH and Eurex [in euro-denominated derivatives] are pretty similar these days,” said Jürgen Feil, head of rates for Germany at the bank.
Hubertus Väth, chief executive of marketing group Frankfurt Main Finance, said that moving euro clearing from London to Frankfurt was “on top of our priority list from the very first day after the Brexit referendum”. [...]
Full article on Financial Times (subscription required)