The Bank of England and the European Central Bank finally closed the chapter on its four-year saga over the City of London’s clearing houses, which required that these offices set up shop close to the Eurozone so they can be easily accessible and monitored in the event of an emergency. Clearing agencies such as the LCH. Clearnet Group and ICE Clear Europe, serve as intermediaries between top banks and other financial firms on major deals to secure transactions. The ECB argued that these offices should be located in the Eurozone as they handled euro-denominated business.
The location policy has been on the ECB’s radar for years. While the BoE never sought to implement any policies to address the issue, Britain managed to secure a top spot as Europe’s financial center despite being located outside of the Eurozone.
Earlier this week, both parties reached an agreement to “extend the scope of their standing swap lines” to provide multi-currency liquidity support. This remains a major responsibility of the U.K. Central Counterparties. In exchange, the BoE will provide the ECB with detailed information on London’s clearing houses and allow the ECB to exert some influence over its decisions.
“These agreements not only strengthened financial stability across the European Union, but also secure a very important principle of non-discrimination of the countries outside the Eurozone, including Britain,” U.K. Chancellor George Osborne said in a statement. “This is vital to our relationship with the Eurozone, and is another step forward in terms of a reformed EU.”