June 6, 2017 / 8:30 AM / 7 months ago

Relocating euro clearing would raise costs - industry body

LONDON, June 6 (Reuters) - Forcing banks to shift the clearing of euro denominated derivatives from London to the European Union after Britain leaves the EU could nearly double the amount of cash that must set aside in case of defaults, an industry body said on Tuesday.

The EU’s executive European Commission is due this month to set out how and where euro denominated derivatives should be cleared after Britain leaves the bloc in 2019.

The bulk of clearing is currently done in London.

The Futures Industry Association (FIA) said forcing a change in location would fragment markets and bump up costs. The amount of margin, or cash banks post in case a derivatives trade defaults, could nearly double from $83 billion to $160 billion, FIA Chief Executive Walt Lukken told a conference in London.

“It’s important that we allow market forces to determine the appropriate location for euro clearing,” Lukken said. (Reporting by Huw Jones, editing by Louise Heavens)

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