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Global pipes – challenges for systemic financial infrastructure

City Lectures and Launches | LONDON Wed 22 Feb 2017

Sir Jon Cunliffe
Sir Jon Cunliffe

City of London

Sir Jon Cunliffe, deputy governor for financial stability at the Bank of England, warned in an OMFIF lecture in London against withdrawing euro clearing from the City because of ‘currency nationalism’.

In a veiled assault on campaigns to bring to Paris the symbolically important market for euro clearing once Britain leaves the European Union, Cunliffe argued that restrictions on currency clearing, such as those geared to national European jurisdictions, are ‘not a necessary condition for either financial or indeed monetary stability’. He said such policy ‘if applied by all jurisdictions, is in the end likely to be a road to the splintering of this global infrastructure.’

Separately, Cunliffe said that augmenting Bank staffing in this field will be a priority in 2017. He also remarked that a supervisory levy will be charged to clearing houses and payment-providers which are under the Bank’s aegis. The Bank plans to ‘up its game’ to press the UK’s advantage in overseeing this complex and systemically significant sector.

Benoit Cœuré, a French economist and member of the European Central Bank’s executive board, recently warned that it would be ‘challenging’ for Britain to implement adequate post-Brexit regulations to preserve the City of London’’s ability to sell its services to the EU, particularly for UK-based euro clearing houses. Cœuré’s remarks echo those made by Mario Draghi, ECB president, in a 10 January letter to a member of the European Parliament on EU regulations and the supranational central bank’s supervisory powers.

Christian Noyer, former governor of the Banque de France and former chair of the Bank for International Settlements, touched on this issue in a speech given at a March 2016 OMFIF conference. Focusing on London’s hub-status for euro clearing, he said: ‘It is already very difficult for euro members to accept that our currency is largely traded outside the currency area, beyond the control of the ECB and of euro area institutions such as market regulators. When tensions occur and risks materialise, the interests of a foreign financial centre might take priority over those of the currency area itself.’

Sir Jon Cunliffe, deputy governor for financial stability at the Bank of England and former UK permanent representative to the European Union, gives an OMFIF City Lecture in London. Cunliffe is a member of the Bank's financial policy and monetary policy committees and the Bank's court of directors. His responsibilities include the supervision and oversight of financial market infrastructures, as well as the provision of emergency liquidity assistance.

To read the full text of Cunliffe's speech, please click here.