The UK Government is looking to sue the European Central Bank over rules it claims will damage the City of London by forcing clearing houses to move to the eurozone.
The Financial Times reports the legal action comes after concerns from ministers following a summer ECB paper which said clearing houses should be based in the eurozone if they handle more than 5 per cent of the market in a euro-dominated financial product.
The UK is claiming the rule restricts the movement of free capital and infringes on the right to establish cross-border businesses across a multicurrency European Union.
The ECB proposal would meanLondon clearing houses would have to move operations to the eurozone with Paris or Frankfurt the likely destination.
The Treasury says: “This decision contravenes European law and fundamental single market principles… That is why we have begun proceedings against the European Central Bank through the European Court of Justice.”
London currently houses LCH. Clearnet which processes all share trading on the London stock exchange and has an over-the-counter derivatives clearing service.
The ECB claims the proposals are necessary to confine the financial infrastructure in the eurozone so crises are not handled by multiple central banks with conflicting interests.