FRANKFURT (Reuters) - Euro zone central banks must consider “action” to maintain control of clearing securities trading denominated in euros that occurs outside the European Union after Britain’s decision to leave the EU, a European Central Bank director said on Thursday.
The clearing in London of trillions of euros worth of trades denominated in euros has become a key point of contention since Britain’s vote to leave the EU last June.
With more than 90 percent of the euro-denominated derivatives business of euro zone banks cleared via Britain-based firms, Yves Mersch said the Eurosystem risked losing control of a key factor for the stability of the euro.
“The UK’s recent decision to leave the EU has called into question the ability of authorities such as the Eurosystem to ensure they can continue to adequately control the impact of offshore clearing activities while maintaining the stability of clear their currency,” Mersch said at an event in Luxembourg.
The City of London has said there was no case for shifting the business to the continent even after Brexit. Moving would be complicated and potentially destabilizing, and continental companies would ultimately pay for it, banking figures say.
But the European Commission has announced it will publish a draft law to tighten its grip on clearing next month, and Mersch said on Thursday the Eurosystem of the euro zone’s 19 national central banks and the ECB should also consider action.
“I want to reiterate the need to reflect on whether recent geopolitical events require the Eurosystem to take action to ensure that we continue to adequately control the impact of offshore clearing activities on the stability of our currency,” he added.
Reporting By Francesco Canepa, editing by Larry King