This story is being reported entirely the wrong way around. For we’re being told that we should all be really grateful to that lovely European Commission for allowing The City to continue to make money. The correct approach being to note that the Commission has graciously allowed European banking to stay in business:
Relief for City as EU extends bank access to London clearing houses
Sure, the City’s interested, who wouldn’t be in being able to skim a basis point or two off Johnny Foreigner? But who is that benefits from bread, me who gets to have a sandwich or the baker who gets the pennies? Given that it’s a voluntary transaction clearly both do benefit but who is really gaining? It’s me with the access to the staff of life. The baker’s just in business and I get not to die of starvation.
So it is with this clearing business:
Clearing houses – which process financial products worth hundreds of billions of pounds every day, acting as middlemen between buyers and sellers for financial assets – has been a key area of debate since the EU referendum. Politicians on the continent had argued that EU derivatives should be cleared in the EU rather than London after Brexit.
Clearing plays a crucial role for London as a financial centre, with the London Stock Exchange’s LCH dominating the continent’s €735 trillion (£658 trillion) annual market.
There were fears that EU banks would lose access to the clearing houses in January, threatening London’s dominant position, but leaked proposals from the European Commission shows that the relationship can continue for another 18 months.
So who is it that benefits from clearing? The clearing houses like it, obviously, because they makes that basis point or two. But the people who really benefit – as with the bread – are the people who get their clearing done. Which is why they’re willing to pay to have it done of course. And, in the modern financial world, if you’re not getting your clearing done then you go bust.
So, the EU Commission has just graciously announced that the European banking system doesn’t have to go bust. Which is nice of them, of course it is, but it would be better to report it correctly, no?