Reuters has just reported that the ECB has pushed for “clear legal competence in the area of central clearing” of euro-denominated financial contracts, seeking more control over non-EU clearinghouses — including those in the U.K. after Brexit — that are deemed systemically important to the bloc’s financial markets. US regulators, for the most part, have suggested that the US “has not deemed a body of water – even as large as the Atlantic Ocean – as an impediment to effective [clearing house] supervision and examination”. UK authorities have meanwhile sought to lambast the EU for ascribing to essentially mercantilist impulses in their post-Brexit regulatory posture.
I’m a transatlanticist (we still exist in America!). And an advocate of strong, thoughtful, cross-border coordination. But I don’t think such criticisms are fair. Clearinghouses are key nodes in the (global) financial architecture, and if clearing of the euro in particular arises in a jurisdiction that does not adequately supervise a clearinghouse, the effects could undermine not only financial stability, but also the ECB’s very transmission of monetary policy. It seems only natural then, that, at a minimum, the ECB would seek for its supervisory power over third-party countries to be heightened as it sees such activities set to take place outside its immediate purview. Relocation of clearing infrastructure to the EU is, of course, a harder call, but the decision by EU should rest on (and be subject to criticism in the lack of) a deep analysis of post-Brexit rules, supervision, and information-sharing with EU authorities.