EU court rejects ECB’s clearinghouse policy 05 March 2015Luxemburg Reporter: Mark Dugdale
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Euro clearinghouses do not need be based in the single currency area, the EU’s second highest court has ruled.
The EU’s General Court delivered its judgement in a case brought by the UK against the European Central Bank (ECB).
UK lawyers had argued that the ECB’s policy that euro clearinghouses must be based in one of the 19-eurozone countries would have forced the likes of LCH.Clearnet to relocate or exit the business.
The General Court agreed on 4 March, ruling: “The ECB does not have the competence necessary to impose such a requirement.”
The ECB said in a statement that it would review the judgement annulling its Eurosystem Oversight Policy Framework requirement before deciding on future actions.
The Bank of England, meanwhile, said that is important for the safety and soundness of central counterparties that they have access to liquidity arrangements in the currencies they clear, but “this is already the case for a number of major foreign currencies”.
“The Bank of England recognises that the ECB has an interest in the safety and soundness of UK CCPs who clear significant amounts of euro-denominated contracts. The bank and the ECB will continue to seek a coordinated and shared approach for achieving our common objectives of financial stability and the smooth functioning of financial market infrastructures.”
John Cridland, director general of the Confederation of British Industry, welcomed the “landmark judgement upholding the EU's single market, setting the boundaries of what the ECB can do to support the eurozone without the agreement of non-euro member states”.
“As our biggest market, it is in the UK’s interest for the eurozone to take necessary steps to strengthen the currency union, but that integration cannot and should not compromise the principle of the single market.”
“As the race for shares of global financial markets intensifies, we need to protect our competitive advantage and this ruling gives certainty that financial services should flow freely within the EU without restrictions, which is good for the UK.”
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