Brussels: The EU will present plans on Tuesday to gain new powers over London’s banking business after Brexit in order to undermine the city’s supremacy as a global financial center.
The draft law, presented by European Commission Vice-President Valdis Dombrovskis, will enable Europe, after Brexit, to deny London the right to host “clearing houses” for financial markets traded in euros, the EU’s single currency.
Clearinghouses are an integral part of installing the financial system. Trillions of euros are processed every year, mainly outside of London.
The bill, the details of which were first published in the Financial Times, is a watered-down version of the forced shift in euro clearing originally feared by London, a sign that the EU will not openly insult Britain just days after Prime Minister Theresa May embarrassed her Majority in the UK elections.
The question of whether euro clearing houses can remain in the UK capital became one of the most controversial issues as the UK negotiated its future trade relations with the EU after its departure.
The UK has jealously guarded the dominance of the clearing house sector in Europe and won an EU court ruling against the European Central Bank in 2015 to keep the euro deals going.
According to the draft law, vaunted financial companies like the London Stock Exchange would have to adhere to strict EU supervision in order to avoid a forced relocation of their euro clearing business to a blockland.
“The Commission would like more time to investigate the implications of our proposal,” a factual source told AFP, who confirmed the veracity of the version reported by the FT. With the proposal “the door remains open to the forced relocation” of clearing houses that are at risk of seriously damaging the EU economy, the source said.