MENU
EU Economics

Hammond to fight EU’s $1 trillion power grab

Philip Hammond
New Chancellor Philip Hammond is braced to defend the City from the rest of the EU


New Chancellor Philip Hammond has branded EU efforts to poach a vital $1 trillion market from the UK as “disgraceful,” The Sunday Telegraph can reveal, setting the scene for an almighty row between the Treasury and Brussels.

Mr Hammond was appointed to head the Treasury this week, putting him in prime position to oversee the financial industry and protect its interests in the face of EU hostility.

In his previous job as foreign secretary, he spoke out against a raid on the City which the UK successfully defeated – but which is flaring up once more as European leaders eye up valuable markets they hope to wrest from London.

European Central Bank
The clearing of euro-denominated derivatives could move to Frankfurt or another EU city, if the ECB gets its way CREDIT: KAI PFAFFENBACH/REUTERS


Previously, The European Central Bank tried to force the flow of euro-based transactions out of London and into the eurozone, resulting in a legal challenge from the UK.

Britain won the case in 2015 after arguing for four years that, as part of the EU’s single market, the UK has to have an equal right to host clearing houses, which can process trades with a value of more than $1 trillion per day.

When challenged in May to explain how the UK could stand up to the EU when defending British financial services, Mr Hammond cited the case as an example of the government’s efforts.

“When the European Central Bank disgracefully tried to prevent euro-denominated financial instruments from being cleared in the City of London, we went to the ECJ and won the case, with a clear declaration that the ECB’s proposal was illegal,” Mr Hammond said.

European leaders, led by French President François Hollande, hope to revive attempts to take the market as Britain prepares to leave the EU.

George Osborne
Britain won its long legal battle under George Osborne – but leaving the EU is expected to change the equation CREDIT: PIXEL 8000 LTD


The scale of the clearing market is astronomical – a derivatives deal with a cost of a few hundred thousand pounds could have a notional value of hundreds of millions.

As a result, the job of clearing transactions and keeping track of them is big business. One of the largest clearing houses, LCH Clearnet, cleared $532.8 trillion of swaps last year, contributing to clearing fees of €368.8m.

London has particular expertise in the industry, clearing transactions in a range of other currencies from around the world.

Bankers believe there is no practical reason why clearing should have to be carried out in the eurozone, but EU leaders are keen on the symbolic move.

John McFarlane 
Barclays’ chairman John McFarlane noted that US dollars can be cleared in London but the American government does not object CREDIT: CHRIS RATCLIFFE/BLOOMBERG


“Nobody is worried about renminbi clearing being in London. Nobody is worried about dollar clearing in London. Why is this such a big deal?” asked Barclays’ chairman John McFarlane earlier this month.

“Clearly some national entities in Europe would love it to be there, but the reason those things are in London is because that is where it works. People forget that they are here for a reason. It was an open system. You could have put it anywhere and it came to London. It will be very hard to extract.”

Mr Hammond wanted to remain in the EU, but will now be negotiating alongside eurosceptic David Davis, who is the new Brexit minister, and another Brexiteer Liam Fox, the new secretary of state for international trade.

http://www.telegraph.co.uk/business/2016/07/16/hammond-to-fight-eus-1-trillion-power-grab/

2
Leave a Reply

Help put the World to rights and leave a Comment

  Subscribe  
Notify of
Energa333 (@energa333)
Guest

For Christ sake don’t pay out Philip, if they complain just remind them they need to pay us for our help in WW11.

Energa333 (@energa333)
Guest

For Christ sake don’t pay Philip. It’s about time we asked for payment for helping them in WW11?

MENU
Powered by: Wordpress
%d bloggers like this: