LONDON, Feb 22 (Reuters) - Requiring financial instruments to be cleared in a country that uses the currency in which they are denominated would bump up costs, Bank of England Deputy Governor Jon Cunliffe said on Thursday.
Cunliffe said the clearing of a single pool of multi-currency instruments, as done by LCH clearing house in London, allowed the offsetting of positions to boost efficiency.
“This reduces the costs of central clearing - costs that are ultimately borne by the real economy - as well as allowing a more efficient and effective management of the risks that brings significant global financial stability benefits,” Cunliffe said in a speech in London.
“Requiring each of these instruments to be cleared in the jurisdiction of the currency in which they are denominated would simply render multi-currency central-clearing impossible.”
Policymakers in the euro zone have said that the clearing of euro-denominated derivatives, which LCH dominates, should be moved to the single currency area after Britain leaves the EU.
“In central clearing, in settlement, in payments if we wish to maintain the infrastructure to sustain an open and integrated global capital market, we will need to build upon the arrangements we have developed for supervisory cooperation and co-ordination,” Cunliffe said. (Reporting by Huw Jones, editing by David Milliken)