Moving clearing to a European Union country from London after Brexit is not a “fait accompli” and the business could be transferred to New York, the CEO of London Clearing House said.
LCH already has operations in New York and would therefore not have to start from scratch, making any move less costly. “So then you have to contemplate the movement of the entire business, and New York is clearly a potential destination as well,” Maguire told a House of Lords committee.
Under the proposals, if Brussels felt that joint EU-UK supervision of a foreign clearing house proved insufficient it could require the euro-denominated clearing to be moved to an EU center. Britain is due to leave the EU in March 2019 and UK-based clearing houses would therefore become “foreign”.
While the EU law has yet to be approved, LCH is already facing pressure from Deutsche Boerse, which is offering a “Brexit proof” programme to make clearing euro rate swaps more attractive at its Eurex operation in Frankfurt.
Maguire said if euro clearing were to be forcibly moved to the EU, other countries might want clearing in their currency repatriated from London. LCH clears over 90 percent of dollar denominated rate swaps in London.