Brussels backs down on plans to steal from Britain in ‘victory for pragmatism’

Brussels has pulled back on its bid to seize a larger portion of the derivatives clearing market from the City of London.

The UK’s financial centre’s role in clearing euro-denominated derivatives has been the subject of debate since Britain voted to leave the European Union in 2016.

At the time, the then-French president said the City shouldn’t be able to clear euro-denominated trades.

François Hollande, the former French president, said in 2016: “The City, which, thanks to the EU, was able to handle clearing operations for the eurozone, will not be able to do them.

“It can serve as an example for those who seek the end of Europe. It can serve as a lesson.”

However, following backlash from European banks and fund managers about the extra costs they would have faced from moving the business out of the UK, the European Union has climbed down, agreeing to smaller changes to trading rules.

Now, EU-based banks and financial institutions must have active accounts with European clearing houses, to handle categories of derivatives that the EU’s regulators have deemed “systemic”.

Through them, they must enact a small number of trades.

The minimum threshold will be set at five trades for each relevant category and depend on the value of deals done, with a maximum of 900 trades per year.

Angus Canvin, the director of international affairs at the trade body UK Finance said the new rules were a “victory for pragmatism”.

William Wright, founder of the New Financial think tank, said it was a “sensible compromise”.

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The European Commission will be required to take further measures in two years’ time if heavy reliance on London hasn’t been reduced, EU lawmakers said in a separate statement.

London Stock Exchange Group (LSEG) said customers in the EU share concerns about the requirement to open operational accounts at an EU clearing house.

In a statement, LSEG said: “We call for proportionality in the implementation of these requirements in order to ensure that EU firms are not negatively impacted.”

The new rules will come into force after EU states and full European Parliament have formally approved the deal.