France’s top central banker has thrown his weight behind calls from the European Commission to move oversight of the lucrative trade in clearing euro-denominated securities from London to within the single-currency area after Brexit.
François Villeroy de Galhau, governor of Banque de France, the country’s central bank, said the current set-up, where the Bank of England oversees some of the biggest euro clearers, “is no longer adequate” following the UK’s decision to break ties with the EU.
“We cannot reasonably expect that these global financial market infrastructures [such as central counterparties] take into account, in their operations and risk management, the financial stability of the euro area, on top of the stability of their own jurisdiction,” the governor said in Paris.
“Since, regrettably, London will soon be outside the EU, the current set-up is no longer adequate.”
Mr Villeroy de Galhau’s views echo those of the Commission and the European Central Bank, which have said that oversight needs to move back within the EU after Brexit.
The bulk of clearing of euro-denominated derivatives now takes place in London. But the eurozone authorities have long been keen to oversee the industry, taking their case to the European Court of Justice in 2015. The case was won by the British authorities.
A commission proposal published last week to force clearers to relocate to the euro area was “valuable”, the governor said, though he cautioned that it should be streamlined to only include institutions that were systemically important and presented a threat to financial stability.
“Euro-denominated clearing activities should be located in the European Union when they exceed certain thresholds,” he said.