One of the City of London's post-Brexit fears edged closer to reality on Tuesday as French President François Hollande said that the City of London would no longer be able to clear euro-denominated trades.
Speaking at the end of a summit in Brussels where EU leaders started trying to pick through the wreckage after David Cameron's referendum defeat, Mr Hollande warned that it would be unacceptable for clearing — a crucial stage in trading of derivatives and equities — to take place in the UK.
"The City, which thanks to the EU was able to handle clearing operations for the eurozone, will not be able to do them," he said. "It can serve as an example for those who seek the end of Europe . . . It can serve as a lesson."
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The stripping away of the City's right to clear in euros is a long cherished goal of the European Central Bank in Frankfurt but one that was previously thwarted by the UK in the EU courts. The ECB had argued that it was unfair for it to be expected to provide emergency support to clearing houses that operated outside its jurisdiction, while the UK had argued that a "location policy" would discriminate against Britain and challenge its role in the single market. George Osborne, UK chancellor, described the UK's court victory in 2015 as a "major win for Britain".
Mr Cameron made the prevention of any further such encroachments by the ECB one of the priorities of his, ultimately futile, renegotiation of the terms of Britain's EU membership.
Clearing houses such as Deutsche Börse's Eurex Clearing and London's LCH.Clearnet play a crucial role in confirming trades that have been made on the financial markets and minimising the disruption caused when a trader cannot honour its obligations. London has become a world leader for the clearing of some types of euro-denominated derivatives.
Traders have said that the ECB's location policy would be a warped anomaly in the globalised marketplace for derivatives, creating a Balkanisation of the market.
Still, while the fight over clearing became a point of principle for the UK government, Mervyn King, the former governor of the Bank of England, said that a renewed push by the ECB would not have a huge impact on the City of London.
"The City is much more than a small number of banks that want to trade securities in Europe," he said, adding that "people all around the world" would still want the benefit of Britain's legal system when drawing up financial contracts.