Belfast Telegraph

Euro clearing businesses moving accounts to Frankfurt, lobby group chief says

Euro clearing businesses are already moving accounts to Frankfurt, just days after the EU released proposals that could force operators to leave London as a result of Brexit, the head of the German city's lobby group has said.

Hubertus Vath, the managing director of Frankfurt Main Finance, told the Press Association that he has seen commitment to Frankfurt "speeding up" after the European Commission put forward legislative reforms that would impose stricter supervision of the bloc's derivatives market after Brexit.

"We see a significant rise in the account openings of Eurex Clearing, we see a lot of actors that are doing test trades."

Eurex is owned by Deutsche Borse and is Germany's equivalent to the London Stock Exchange's LCH, which conducts the vast majority of euro denominated clearing.

He added that "some of the big actors have already committed themselves to move their clearing business". including German house KfW.

It is the first sign that London's hold on the multibillion pound euro clearing market in derivatives - which settles business and trade conducted in the EU currency - is starting to slip.

An independent report conducted by EY for the London Stock Exchange (LSE) last autumn said up to 83,000 British clearing jobs could be lost over the next seven years if euro-denominated clearing leaves London.

LSE boss Xavier Rolet also warned last month that businesses would face 100 billion euros (£87.5 billion) in extra costs over five years if euro clearing leaves the City, as the industry would lose out on efficiencies that he claimed saved customers 21 billion US dollars in capital last year (£16.4 billion).

But Mr Vath said those calculations were "hugely over exaggerated," and that the likely impact on the market "would be less than 10% of what the LSE is calculating", before accounting for "opportunities" that would offset any extra costs.

He said comments like those made by Mr Rolet are "not particularly helpful" ahead of Brexit talks, which begin on Monday, June 19.

"It doesn't help in mutual trust during the negotiations process if right at the very beginning ... somebody throws around figures which are obviously serving only one purpose - and that is to make one side's point," Mr Vath said.

He added: "We don't want to have any destructiveness coming out from those negotiations."

The City of London Corporation and financial services lobby group TheCityUK have also claimed that the UK is the only place that can guarantee financial stability for the euro clearing industry, but the Frankfurt Main Finance chief says Germany is well equipped for the challenge.

While London is the market leader in over the counter (OTC) clearing of euro-denominated derivatives, Mr Vath highlighed that Frankfurt leads in their listed counterparts and is best equipped to take on more OTC trading among its EU peers.

"Secondly, we have the licences and technology in place to scale it up."

He said: "I've been telling my British friends that look, even though we want to have an amicable divorce, don't expect euro clearing to stay as it is.

"It would be naive."