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ECB seeks to regulate euro clearing with change to statute

The European Central Bank has recommended changing its statute so that it can take on stronger oversight of euro clearing – a key battleground in Brexit negotiations with the UK, where much of this business is currently conducted.

“The amendments will allow the Eurosystem to monitor and address risks associated with central clearing activities that could affect the conduct of monetary policy, the operation of payment systems and the stability of the euro,” the central bank said in a statement on Friday.

Brexit has re-opened the rift between the ECB and London over clearing after the European Court of Justice ruled in 2015 that activity could remain in London — against the ECB’s wish to force activity to decamp to the eurozone.

UK-based firms such as LCH now clear around three quarters of euro-denominated derivatives — a process which involves standing between two counterparties to protect one against the risk of default by another.

Related: What is London’s euro clearing market, and why is Brussels worried?