EU Economics

Deutsche Bank crisis – CEO hits back at EU plans for Brexit clearing

DEUTSCHE Bank boss John Cryan has questioned why Europe’s financial centres are so keen to snatch post-Brexit clearing business from London and suggested those behind the efforts are unsure of what is involved.

Deutsche Bank boss John CryanGETTY

Deutsche Bank boss John Cryan says their is confusion over clearing

Mr Cryan said there was “confusion” about the function of clearing in financial markets and claimed the number of jobs affected by relocating the business had been overstated by thousands.The role of the clearing houses is to stand between two parties in a deal and manage the risk to the market if one side defaults on payment.

But in Europe it has become a battleground to reshape capital markets after Brexit.

The City of London handles about £1 trillion a day

I don’t understand why the Europeans want clearing. There’s confusion about what it is

John Cryan

London is the global centre of the clearing industry and processes £1 trillion a day in swaps and fixed income trades denominated in euros.Brussels said the industry will need more direct oversight from EU regulators and central banks after Brexit but Britain insists it is a global business rather than an EU one.

Mr Cryan told the FT: “I don’t understand why the Europeans want clearing. There’s confusion about what it is. The idea of 74,000 jobs being at risk is ridiculous, it’s more like 74.”

His comments contradict EU politicians and policymakers including many in Deutsche Bank’s home town of Frankfurt.


Efforts to snatch London’s lucrative clearing houses has become a key Brexit battleground

The European Commission is drawing up proposals for tougher direct regulation and few EU-based chief executives have been willing to speak publicly on the issue.Some in the industry privately agree with Mr Cryan’s assessment that the jobs toll would likely be far lower than published estimates but said there were valid reasons for EU cities wanting the clearing role.

A Frankfurt-based financial expert told the FT: “This job argument is focusing on one single aspect of the debate which is really not at its centre.

“It’s not about jobs but about financial stability.

“The question on euro clearing boils down to the issue if Europe was feeling comfortable with a situation where some of the biggest financial markets — repos, interest rate swaps and credit derivatives — were settled in an offshore location.”

Deutsche Bank CEO John CryanGETTY

Deutsche Bank CEO John Cryan questions why Euroeans are so keen on clearing houses

Brussels has long been unhappy that London is home to the business of clearing euro-denominated derivatives despite the UK choosing not to join the single currency.The situation deteriorated further during the eurozone crisis when the London clearing houses increased the margin required against some countries sovereign debt, lifting those countries’ borrowing costs.

A Frankfurt banker said: “There always is a tail risk that something goes awry. The trades are involving such huge sums that if push comes to shove, you cannot rely on a regulator outside your own jurisdiction.”

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