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No case for shifting euro clearing after Brexit - City of London

Reuters  |  LONDON 

By Huw Jones

(Reuters) - is good at euro-denominated derivatives deals and there is no case to shift the business to the continent after Brexit, the policy chief for Britain's financial sector said on Tuesday.

The combative stance of Catherine McGuinness, newly appointed head of policy for the City of financial district, contrasted with the more nuanced position of Bank of England Governor Mark Carney, who has spoken of an "appropriate" amount of euro remaining in post-Brexit.

Her comments came as the EU's executive Commission prepares to publish a draft law next month on euro France is in the vanguard of countries pushing for the lucrative business to relocate to the euro zone after leaves the bloc in 2019.

McGuinness said was a $1 trillion a day business and it was natural that people wanted a slice of the cake.

"And in this case, all the evidence points one way: that the mass uprooting and offshoring of part of the industry - of of transactions in one currency - would not only be vastly complicated, but also vastly damaging and potentially destabilising," McGuinness told a conference of the Futures Industry Association in

The Commission has considered several options, including forced migration of business and tighter supervision of foreign houses that handle large amounts of euro-denominated transactions.

France argues shifting to Europe would make it easier for the European Central Bank to directly monitor risks arising from the derivatives market.

But McGuinness said markets had chosen because it's systemically safer to centralise so that exposures can be netted.

"It's because it makes the posting of collateral more cost-effective. And, frankly, it's because we're good at it."

has the scale, infrastructure and expert professionals, she said.

"And if we split off one currency, with euro moving to, say, Paris, all we'll see is systemic risk going up, liquidity going down, costs hitting the roof," she added.

"In sum, it'd be a completely avoidable outcome."

Euro-denominated in Europe is dominated by the Stock Exchange's LCH house in Deutsche Boerse's Eurex in Frankfurt is, however, ready to handle any sharp increase in swaps

McGuinness said forced migration of would not be in the interest of the global financial system, and that U.S. regulators were also watching developments in Brussels closely.

(Reporting by Huw Jones; Editing by Mark Trevelyan)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)