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Brussels has proposed extending EU banks' access to UK clearing houses for another three years in a victory for the City of London.
The European Commission on Wednesday announced a new so-called “equity decision”, which will allow banks and other financial institutions in the bloc to use some of the most important items on the global market in London until June 2028.
EU politicians want to capture profits euro-denominated clearing business since the Brexit vote in 2016 but has accepted that its financial system is still dependent on the UK, which controls the world's derivatives clearing business.
Clean up Real estate reduces market risk by standing between two parties in a trade.
London usually handles deals worth around $3.5 million a day. It is a global trading center for commercial interest and Brent crude oil, with clearing contracts held on the LCH of the London Stock Exchange Group and the Intercontinental Exchange.
European exporters have lobbied hard to extend the City's permit, which expires on June 30 after three years. Member states have five days to object to the commission's proposal to extend it until June 2028, but such opposition was not expected, officials said.
The commission said UK clearing houses were key to its plans to build a single market for savings and investment.
“Two houses (clearing houses in the UK) have been identified by the European Securities and Markets Authority as strategically important for the stability of the EU currency,” said Olof Gill, a spokesman for financial services, referring to LCH and ICE.
“The expansion of the equity decision is therefore necessary to avoid any risks to our financial stability in the short term, and to provide certainty and clarity to the participants of the EU financial markets,” he added.
But he added that Brussels is committed to building a competitive industry. Last year it adopted a revised European Market Infrastructure Regulation that will force EU banks to hold “active accounts” in EU-based clearing houses for some products, and if users meet minimum thresholds for others.
The regulation “contains measures that will improve the attractiveness and competitiveness of EU refinery markets. This will help reduce in the medium term the EU's over-reliance on UK housing,” said Gill.
Pascal Kerneis, of the European Services Forum, which represents service companies trading internationally, welcomed the move.
“It will give a clear view to the operators of the EU financial market in the medium term.
“This would give a good political signal to 'reset' EU-UK relations,” he said.
The two sides have started talks to improve trade relations. UK Chancellor Rachel Reeves met her EU counterparts in December and asked them to drop barriers to City firms. He said they could boost the EU's growth by attracting international investment to the bloc.
Cleaning is only part of the financial services that have been given equity since Brexit.