Britain says EU will struggle to move London euro clearing

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John Glen, local MP for Salisbury and South Wiltshire, speaks to the media in Salisbury, Britain April 3, 2018. REUTERS/Hannah McKay

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LONDON, April 26 (Reuters) – Britain’s financial services minister said on Tuesday that the European Union would struggle to replace London in clearing trillions of euros in derivatives, and that the limited change in business so far not accelerating.

Following Britain’s departure from the bloc, Brussels said it wanted to build euro clearing capacity within the EU to end a heavy reliance on the London Stock Exchange’s LCH unit, which clears most euro interest rate swaps.

Brussels is allowing EU banks to use London for clearing until June 2025, and in the meantime will introduce incentives for banks to transfer more business to Frankfurt, and potential penalties for those who don’t . Read more

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“It’s quite difficult to build that infrastructure, but that’s their business,” UK Financial Services Minister John Glen told the House of Lords European Affairs Committee.

Small amounts of compensation were moved from London, but not enough to worry Britain, Glen said.

“I don’t think it’s part of a trend,” he added.

Although Brexit has largely cut Britain’s financial sector out of the bloc, Glen said the sector had grown and was resilient, with around 7,000 jobs leaving London for the EU, not the haemorrhage originally predicted.

With the exception of clearing, the EU has not granted access to other financial activities from Britain, unlike the US and Singapore.

“I’m not waiting for this decision,” Glen said, adding that his aim was to make London a competitive and well-regulated place for mine clearance.

Britain and the EU will develop their own regulatory regimes in parallel, particularly in new areas such as fintech, green finance and crypto, Glen added.

However, non-EU banks were concerned about EU proposals that could require them to set up a branch when providing wholesale market services to clients in the bloc, Glen said. Read more

“We expect the EU to clarify where it is going. It seems to be moving in a positive direction and I welcome that,” Glen said.

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Reporting by Huw Jones; edited by Barbara Lewis

Our standards: The Thomson Reuters Trust Principles.

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