EU ruling on euro clearing to take months, financial chief says

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LONDON (Reuters) – The European Union will take months to decide if banks can continue clearing derivatives in London, the EU’s financial services chief said on Thursday in a sign of how Brussels is keeping up pressure to shift business to Frankfurt.

A European Commission working group looked at how trillions of euros in interest rate swaps could be shifted from London to give EU regulators a direct say over the activity.

“We will in the coming, let me say months rather than weeks, have to look again at the time horizon here, but we have made no decision,” EU financial services commissioner Mairead McGuinness told a Bruegel think tank event.

Industry officials who took part in the meetings say the EU executive appeared surprised by broad opposition to mandatory migration, saying it was up to customers, though some sort of face-saving solution would be needed.

Since Britain fully left the EU last December, clearing houses there have temporary EU permission to keep serving EU clients until June 2022.

LCH, the euro swaps clearer owned by London Stock Exchange, would need to serve three-months’ notice to EU customers if a decision on access is not taken by March.

The EU wants to build up more “autonomy” in its capital market to end a reliance on the City of London, still Europe’s biggest financial centre.

The EU’s securities watchdog ESMA is expected to reach conclusions by year end on whether LCH or other UK clearers are so “systemic” that EU business should be shifted to the bloc.

“It’s often suggested that everything is fine, why would you do anything?” McGuinness said.

“Everything is fine today, but when things go wrong could we guarantee that Europe would be on the same level as the UK if there is a problem, and where do we look after our interests in making sure that we are not overly reliant on any infrastructure for our stability?”