Britain plans to sue the European Central Bank over a new rule that will force clearing houses to be located in the eurozone if they handle large amounts of euro-denominated securities. Britain's finance ministry said the rule "contravenes European law and fundamental single market principles by preventing the clearing of some financial products outside the euro area."
"That is why we have begun proceedings against the European Central Bank through the European Court of Justice," a Treasury spokesman added. The ECB declined to comment. The EU's highest court has powers to force EU institutions or member states to make changes to their rules so they conform with the bloc's fundamental tenets, in this case the free movement of capital, services and the right to locate a business in any part of the 27-nation union. Under the new ECB rules, published in July, central counterparties that have a daily net credit exposure of more than 5 billion euros in one of the main euro-denominated product categories or hold on average more than 5 percent of the daily net credit exposure of all clearers of such products should be legally incorporated in the eurozone.
UK-based LCH.Clearnet is one of the biggest clearers in the world and handles large amounts of euro-denominated transactions such as bonds and interest rate swaps. It declined to comment. US-based CME and another American exchange, ICE, have also set up clearing operations in London to compete across the EU.
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