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The EU is gearing up for a campaign to seize greater control of one of the City of London’s most prized assets: its dominance over the clearing of €81tn worth of derivatives contracts that are vital for global businesses.
François Hollande fired the starting gun less than a week after the UK’s shock decision in June 2016 to leave the EU, with the French president at the time warning “the City, which thanks to the EU, was able to handle clearing operations for the eurozone, will not be able to do them”. Five years later, the UK still controls 90 per cent of euro swaps clearing, an issue that is causing increasing angst in Brussels and across EU capitals as Britain’s financial regulations begin diverging from those in the bloc.
“We are facing a reality — the current concentration is clearly unsustainable,” a senior EU official told the FT. Swaps are widely used by companies to protect themselves against unfavourable changes in interest rates. Brexit has also reshaped trading of euro swaps, pushing it out of the UK capital to EU cities like Paris and Amsterdam as well as across the Atlantic to Wall Street...
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