Following the Commission's presentation, on Tuesday 13 June, of the new supervision mechanism for central counterparties (CCPs) located outside the EU, it did not have to wait long for the first reactions from the financial centre of the City of London.
Stressing that London is the “unparalleled leader when it comes to clearing”, Catherine McGuinness, chairman of the policy committee of the City of London Corporation, the council responsible for the Square Mile financial district, said that the EU could “damage itself unnecessarily” with this decision.
“The EU is simply not equipped to handle the volume and clearing that the UK does each day”, she added, pointing out that the United Kingdom represents 40% of global trading, whilst the remaining member states of the EU27 account for less than 10% of the combined market share between them.
The question of the future location of central counterparties handling derivative products in euro is a particularly sensitive one, with the UK and the EU about to start Brexit talks.
This is not the first time that London has had to defend its place as Europe's principal financial centre. In a judgment returned on 4 March 2015, the General Court of the EU found in favour of London, concluding that the ECB could not require the major CCPs to be located in the Eurozone (see EUROPE 11267).
Although the EU has not so far tackled this question in its existing legislation – either in the proposed amendment to the EMIR regulation of this May or the Commission's proposal on the recovery and resolution of central counterparties – the new proposal authorises the Commission, by request of the European Securities and Markets Authority (ESMA) and in agreement with the competent central bank, to decide that a third-country CCP must relocate its activities to the EU if it wishes to receive the regulatory authorisations necessary to be able to operate on the single market (see EUROPE 11807).
In a press release published on the same day, the biggest UK financial lobby, TheCityUK, said that the worst-case scenario – in other words automatic relocation – had been avoided. Indeed, the proposal provides for this decision to be made only for a limited number of third-country CCPs presenting a higher systemic risk than supervision could attenuate.
However, the British lobby criticises the Commission for its vagueness over the actual terms for this relocation policy to be triggered.
Warning of the harmful effects of this new mechanism, the Director General of TheCityUK, Miles Celic, said that “this kind of currency nationalism” could lead to less competition, costs and market fragmentation. (Original version in French by Marion Fontana)