The European Commission could look to have a more centralized role in overseeing derivatives, which are complex financial contracts, when they are denominated in euros.
According to a report in The New York Times, the European Commission also “suggested” it could require that clearing houses, which serve as the middleman for derivatives transactions, have to be located within the European Union.
If the rules go through, the paper reported it could force clearing houses for derivatives to be regulated by the European Commission, even once the U.K. exits the EU, or it could force the clearing houses to relocate a portion of their operations to prevent business from going to competitors.
“Of course, in the context of Brexit, we see that the situation is changing,” Valdis Dombrovskis, a vice president of the European Commission, said in a briefing announcing the proposals, reported the NYT. He noted enhanced supervision of the derivatives markets had been on the agenda for years now, but that Brexit made the proposals more urgent.
Meanwhile, Britain’s Prime Minister Theresa May argues European officials are hardening their stances to impact the parliamentary elections slated for June 8.
For London, the rules governing the financial sector are going to be very important, given the ability to provide services to Europe-based clients in the single market has been driving growth in the financial industry in Britain.
When the country leaves the EU, that access can no longer be a sure thing and will depend on how talks with the European Commission progress. The report noted that an important question that needs to be answered for financial companies is the extent to which they will be able to clear and settle euro-based transactions outside the EU.
Britain has already started the countdown to leave the EU and will be out of it by March of 2019.