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BRUSSELS has granted permission to European banks to trade trillions of pounds through the City of London until 2022 amid fears of an acrimonious split with Britain.
By Joe Barnes Brussels Correspondent
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The UK is a world leader in the financial markets with City-based firms acting as the middlemen for buyers and sellers across the globe. European Union banks face being cut off from vital “clearing houses” at the end of the year if Brexit trade talks collapse. Those EU banks “clear” around £670 trillion a year – with the vast majority of business going through London.
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With eurocrats becoming increasingly worried about the 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 said: Clearing houses, or CCPs, play a systemic role in our financial system.
“We are adopting this decision to protect our financial stability, which is one of our key priorities.
The EU has handed out an 18-month licence for European banks to continue using the City of London (Image: GETTY)
European Commission vice-president Valdis Dombrovskis (Image: EbS)
“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.”
The move comes despite years of posturing from Brussels and failed attempts to lure British business to EU financial hubs such as Paris and Frankfurt.
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European banks still have a huge reliance on the City of London (Image: GETTY)
City sources had previously claimed 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 circulated to European capitals last week told them more than 90 percent of euro trades are “cleared” through London.
In the note, eurocrats also warned cutting off access to the City would “create major challenges” for EU states in managing the financial fallout from the coronavirus pandemic.
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Lord Frost and Michel Barnier are due to hold negotiations in Brussels next week (Image: GETTY)
Member states have urged Brussels to ramp up preparations for Britain quitting its transition from the bloc without an agreement at the end of the year.
Chief negotiators Lord Frost and Michel Barnier are expected to hold talks this week to prepare for the next formal round on September 28.
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The next negotiations, due to be held in Brussels, are seen as crucial in hitting the October deadline for a deal set by both sides.
A European Commission spokesman said: “As usual we will remain in contact with the UK to prepare for this round.”
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