Brexit: ECB takes steps to wrestle control from City over London-based clearing operations

The ECB is concerned that its authority over the trading may be weakened after Brexit

New rules now under consideration in Brussels would give the EU powers to forcibly move clearing to the bloc if enhanced supervision is deemed insufficient (Getty)

The European Central Bank has requested enhanced powers to supervise clearing activities, it said on Friday, a move to shore up its authority over London-based euro clearing once Britain leaves the EU.

The ECB estimates that €101bn (£88bn) worth of euro-denominated derivatives trading is cleared in the UK each day and open positions total around €33 trillion, or more than 90 per cent of all euro derivatives trade done around the globe.

The ECB is concerned that its authority over the trading may be weakened after Brexit, undercutting the central bank's oversight of a systematically important activity.

ECB board member Benoit Coeure said this week clearing activities might need to be moved from London to the EU if the post-Brexit framework reduces the ECB's powers.

Its authority is now primarily exercised through its participation in supervisory colleges - panel that includes host country and international supervisors - and backed by European court jurisdiction.

The new powers, subject to the European Parliament's approval, would give the ECB more powers in recognising and supervising systemically important clearing houses outside the EU if they handle "significant amounts" of euro-denominated transactions, the ECB said in a statement.

"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 ECB said.

The proposed amendment is part of the EU's review of its European Market infrastructure regulation and the EU Commission's efforts to increase its powers over clearing.

New rules now under consideration in Brussels would give the EU powers to forcibly move clearing to the bloc if enhanced supervision is deemed insufficient.

Reuters