European banks have been granted access to trade trillions of pounds through the City of London until 2022 as fears of a bitter split with Britain loom.
Undoubtedly, the UK is a global leader in the financial markets with City-based firms acting as the middlemen for buyers and sellers across the globe. European Union banks risk being removed from vital clearing houses at the end of the year if Brexit trade negotiations fail.
Some of those EU banks clear around £670 trillion a year, with majority of business passing through London. With eurocrats being very worried over prospect of a no-deal Brexit, they have signed off on plans to give European firms an 18-month licence to continue using London.
European Commission vice-president Valdis Dombrovskis noted, Clearinghouses, or CCPs, play a systemic role in our financial system.
“This time-limited decision has a very practical rationale because it gives EU market participants the time they need to reduce their excessive exposures to UK-based CCPs, and EU CCPs the time to build up their clearing capability. Exposures will be more balanced as a result. It is a matter of financial stability.”
This comes after years of posturing from Brussels and failed moves to lure British business to EU financial hubs such as Paris and Frankfurt with City sources claiming the bloc would delay granting the decision because of the furious row over the Government’s threat to rip up last year’s Withdrawal Agreement.
A memo that was circulated to European capitals last week said more than 90 per cent of euro trades are cleared through London. it also contain a warning from eurocrats that cutting off access to the City would create major challenges for EU states in managing the financial fallout from the coronavirus pandemic.
However, member states have strongly advised Brussels to ramp up preparations for Britain quitting its transition from the bloc without an agreement by December, with Boris Johnson’s chief negotiators David Frost and Michel Barnier preparing to hold talks this week in preparation for the next round of talks on 28 September.
According to European Commission spokesman, the EU will remain in contact with the UK fopr the next formal round of talks that will hold in Brussels.