Dombret calls for strong supervisory rights over euro clearing in London
In an interview with the news magazine Der Spiegel, the Bundesbank Executive Board member Andreas Dombret urged that banking supervisors be granted strong rights over euro clearing in London after Brexit. Euro derivatives have so far been cleared in large part by clearing houses in the UK capital. Mr Dombret, the Bundesbank Executive Board member responsible for banking supervision, considers this business to be highly systemically important. That is why the clearing of euro securities trades could only continue to be based in London if European supervisors have strong rights to information and powers of intervention at all times, he explained. “
We cannot allow a situation to arise in which banks have to be bailed out at the expense of European taxpayers because we didn’t have access to the clearing house in London,” Mr Dombret remarked. Should the UK be unwilling to cooperate when it comes to these strong rights of control, Mr Dombret believes it would be necessary for euro clearing to find a new home. “
It won’t work if London adopts a siege mentality inspired by the motto ‘everything will stay as it is’,” he stated.
Dublin und Frankfurt could be particular winners
Mr Dombret also commented on the potential relocation of financial institutions, saying that banks will probably move a good many jobs from London to the EU after Brexit. “
It looks like Dublin and Frankfurt will be particular winners,” Mr Dombret noted in the interview. He reported that the Bundesbank is currently in talks with about 20 big banks which might be shifting their bases to Frankfurt am Main. Mr Dombret pointed out that these institutions aren’t just those seeking authorisation for a traditional banking licence, though; there are also broker-dealers, which are investment banks that conduct securities trading on a large scale. Asked about the impact on the German economy of such an influx of banks, his assessment was positive. Wherever banks have their EU base, qualified staff will come to work, he said, and that’s where business decisions will be made, too. “
And that will spark a spirit of optimism in Frankfurt,” Mr Dombret went on. Networks will also be forged between banks, which will attract other enterprises, and as a result, we will see a cluster effect, Mr Dombret predicted.