PARIS (Reuters) - France’s top central banker supported on Thursday European Commission proposals to move oversight of the trade in clearing euro-denominated securities from London to within the eurozone after Brexit.
Around 90 percent of euro-denominated derivatives are cleared in London. A European Commission draft law would give Brussels the power to deny recognition to a clearing house if it posed excessive risks or to require it to move to the EU.
“We cannot reasonably expect that these global financial market infrastructures take into account, in their operations and risk management, the financial stability of the euro area, on top of the financial stability of their own jurisdiction,” Bank of France Governor Francois Villeroy de Galhau said.
“Since, regrettably, London will soon be outside the EU, the current setup is no longer adequate,” he added.
Villeroy, a European Central Bank governing board member, said the European Commission’s proposals were “valuable” but should be “strengthened”, with more precise definitions.
“Euro-denominated clearing activities should be located in the European Union when they exceed certain thresholds,” he said.
Clearing houses, like the London Stock Exchange’s LCH.Clearnet (LSE.L), and UK officials argue that forced relocation would split markets, increase trading costs and diminish the status of the euro.
Reporting by Michel Rose; editing Richard Lough