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Euroclearing is an inevitable casualty of Brexit. Even Leave campaigners told us that

July 19, 2017

The growing realisation in the City of London that the multi-billion Pound business of clearing Euro transactions through London’s financial system is going to come to an end with Brexit really shouldn’t be the shock some think it is.

Since Jeremy Browne, the former Liberal Democrat minister now acting as the City of London’s Brexit envoy, came back from visiting Paris and Luxembourg last week, the City has been panicking about the threats to its role, especially Euroclearing. It shouldn’t panic. It should resign itself to losing that lucrative business.

This really shouldn’t be a surprise to anyone.

It took the intervention of the European Courts in March 2015 to ensure London could continue to have a role in clearing Euro-denominated transactions after the European Central Bank tried to restrict that role to countries within the Eurozone. The court said that it had to be open to all countries within the European Union, not just those in the Eurozone. Obviously once we leave the EU this protection no longer applies and it would be extremely naive not to expect the ECB and other Eurozone countries to move to take back this business.

Certainly leading pro-leave economists were not naive about that, nor were they shy about telling us it would happen.

I chaired a roundtable in the City a few weeks before last year’s referendum attended by Gerard Lyons, one of the Economists for Brexit and a former adviser to Boris Johnson. He was clear in his view that if we voted to leave we would lose the Euroclearing role the UK government had fought so hard to win.

It is almost impossible to construct a argument for London retaining the role that goes beyond pointing to the expertise and systems that London has built up as it created a major role for itself in this business. Unfortunately, expertise and systems in the world of financial services are relatively easy to move, especially when there is regulatory and governmental backing for doing so.

It is an argument that was lost the day we voted to leave the EU. The City has to let it go and concentrate on the battles around access to European markets that can be won and which could be even more damaging if they are not.

2 Comments
  1. Nick Starling permalink

    David – does this not mean that the Americans could argue that dollar clearing could only happen in the US?

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  2. Presumably they could but they don’t have any need to do so, neither do we with Sterling. As a trading currency the Dollar needs to be cleared internationally The Eurozone still needs to exert greater control over its own destiny and obviously has no desire to be a trading currency outside its own block.

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