Sir Jon Cunliffe's comments in The Times today hold out the
hope that, despite all the sabre rattling from certain European
quarters, the European Union would be unwise to try and destroy the
City of London's position on the global financial stage.
Sir Jon commented "Europe would shoot itself in the foot if it
tried to dismantle the City of London in Brexit
negotiations". He also made the point that any attempt
to do so would cause suffering in Brussels as well and London.
It is certainly to be hoped that there is no such attempt as the
City based financial services sector pays £66 billion in tax,
which makes a crucial impact on the British economy and exports
£51 billion more that it imports.
The likelihood of being able to replicate the complexities of
the City's financial district in any other European city are
slim, despite the French flagging up an interest with
Françoise Hollande expressing the desire for the clearing of
euro-denominated contracts to be moved to the single currency
area. New York is the only place that comes close to the
City's financial capacity, but both financial districts have
taken a considerable number of years to establish and are far more
complex than they appear to be at first glance.
Even with the most benign Brexit there will be changes and there
is divided opinion as to what Britain would lose. Former
governor of the Bank of England, Sir Charlie Bean, believes that
the City would lose clearing. Whereas Sir Jon is not so sure,
pointing out that at least three quarters of the clearing carried
out in the City is in dollars with only a quarter in euros and that
fracturing the "multi-currency infrastructure" will only
lead to a rise in costs which will have an impact all over Europe
as well as in Britain.
Brexit changes cannot be avoided and some banks are apparently
considering moving their headquarters related to certain sectors of
their business but there is a slightly higher level of optimism in
the City in light of Sir Jon's viewpoint.
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The implementation of the mandatory exchange of initial and
variation margin for non-cleared OTC derivative trades in the EU
commenced on 4 February for financial counterparties with the
largest derivatives portfolios.
On February 9, 2017, HM Treasury published a paper summarizing responses to its consultation on the transposition of the revised MiFID and three draft statutory instruments to facilitate transposition.
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