Brexit: City of London backed to thrive by Daniel Hodson
The European Commission is under pressure after Brexit to produce plans to end the bloc’s reliance on London as the Continent’s largest financial hub. Senior politicians have demanded a “master plan” to expand the EU single currency’s role across global markets in response to Brexit and post-Trump America. Eurocrats are set to publish their first plans tomorrow for ending the reliance on the City of London.
“The COVID-19 crisis has highlighted vulnerabilities in the solar-dominated international financial system,” the Commission paper says.
“The withdrawal of the United Kingdom from the EU strengthens the need to further deepen the Union’s capital markets.”
The document could pave the way for Brussels eventually phasing out the UK financial services sector’s access to EU markets.
The UK has been allowed to continue clearing European trades through the City until the middle of next year.
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The paper said: “A related source of risk is the excessive reliance of EU banks on foreign exchange swap markets.”
It will set in motion a blueprint for the Commission, ECB, the bloc’s banking watchdogs and industry to assess “possible technical issues” related to moving derivatives positions from the City to the EU.
The Commission will also recommend tougher enforcement of EU sanctions, as well as making the EU’s financial services market less susceptible to sanctions.
The move comes after European securities depositories Clearstream and Euroclear were hit hard by President Donald Trump’s sanctions against Iran.
The EU also needs to end its “excessive reliance” on foreign investment banks and funding in foreign currencies, the paper says.
Brussels and Britain are set to conclude talks on a new financial services relationship by March.
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A comprehensive pact could see the City of London maintain its position as Europe’s chief financial services hub.
German MEP Markus Ferber demanded a “master plan” to ensure the EU is no longer dependent on third countries for vital financial trades.
In a statement, he said: “We need a clear step-by-step master plan that helps key financial sector businesses move from the United Kingdom to the European Union.
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“A mere ‘wait and see’ approach will not do to bolster European financial markets.
“One of the key strategic priorities in the years to come has to be strengthening the Capital Markets Union and moving the strategically important clearing business to the EU.
“If the EU wants to play in the geopolitical champions’ league we need a financial system to match it.”
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