Exclusive: The major banks have asked to prove why they are still clearing euro swaps in London

LONDON (Reuters) – Europe’s top banks need to justify why they should not move billions of euros worth of euro-denominated subsidiaries from London to the EU after Brexit, an EU document seen by Reuters showed Tuesday.

The refiners in Britain are allowed to continue clearing for EU buyers until mid-2022 to give banks time to move their euro positions to the continent, but the transition has been slow.

Banks are being asked to comment in detail on the transfer of euro derivatives positions from London on Friday at the first meeting of a new European Commission working group on moving the euro clearing.

“The current level of exposure to the main UK parties (CCPs) raises a number of issues for the EU that should be addressed by reducing the EU’s exposure to UK CCPs,” the European Commission said in a questionnaire. was sent to banks.

The EU wants to deepen its capital market to cut trust in the City of London now that Britain has left the single market.

EU policymakers and the European Central Bank, which regulates major lenders, have long called for the clearance of the euro to be moved from London to the single currency area where it can be managed. directly.

London Stock Exchange’s LCH arm will continue to clear most euro exchange transactions, even as trade flows in the exchanges have shifted from London to EU and New York platforms since 31 December .

“The aim of this discussion is to ensure that the Commission is aware of all possible obstacles, barriers and opportunities,” said the document prepared for the meeting.

Banks are being asked to say what types of products they are cleaning up in Britain that they would consider “easier to clean” at a clearer EU body instead, an indication of an approach that could be targeted.

“Participants are urged to reflect on the feasibility of re-issuing transactions already in UK CCPs into another CCP, so as not to go through the market,” the document said.

Banks, which are also being asked to determine why it would be difficult to move some yields, say separation markets would cut margin savings or money posted against trades, which come from networking across a wide range of businesses.

“Isn’t there a market break in eviction without any adverse effect on the market?” the document states.

It asks for details of the trade alphabets they hold at LCH, and what conditions are necessary to move the careers from one clearer to another.

“There are a number of third party service providers offering conversion services, why not use them? ”He asks.