LONDON/FRANKFURT: The European Central Bank and the Bank of England have struck a deal that will allow clearing houses in Britain to handle euro-denominated securities, ending a long-running legal battle.
The agreement follows a court ruling, which led the ECB to shelve a policy requiring clearing houses that handle euro-denominated securities to be located in the euro zone.
Britain had challenged the policy in the European Union's second-highest court, fearing it would damage London's role as a financial centre. The court ruled earlier this month against the ECB.
The ECB was concerned that if a London-based clearing house ran into trouble, it would not be eligible for direct support from the bank and the euros it could provide.
A clearing house stands between two sides of a securities transaction to ensure it is completed even if one side goes bust.
The ECB and the BoE said in a joint statement on Sunday that they had agreed to extend a deal under which the ECB could provide the British central bank with euros.
The BoE also will provide the ECB with information on Britain-based clearing houses with significant euro-denominated business.
The ECB and the UK government have agreed to end all legal action connected to the lawsuits that Britain had filed in the matter, the central banks said.
The French central bank had led a drive to locate clearing houses in the euro zone, because France is home to one of the region's biggest clearing houses, Clearnet, whose London arm LCH.Clearnet, clears large amounts of euro-denominated securities.
British finance minister George Osborne said in a statement, "These agreements not only strengthen financial stability across the EU, but also secure a very important principle of non-discrimination of countries outside the euro zone, including Britain. This is vital to our relationship with the euro zone and is another step forward in terms of a reformed EU."
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