Noyer Warns London Can't Keep Euro Trading Role With ‘Brexit’by
Former Bank of France Governor comments in OMFIF article
ECB lost court case to bring euro clearing to euro area
Former Bank of France governor Christian Noyer said that London won’t be able to keep its central role in euro trading if the U.K. leaves the European Union.
“If Britain left the EU, the euro area authorities could no longer tolerate such a high proportion of financial activities involving their currency taking place abroad,” Noyer, who was the European Central Bank’s first Vice President from 1998 to 2002, wrote in an article distributed by OMFIF.
The U.K. will vote on June 23 to decide whether it remains in the EU, with opponents to membership hoping to keep the benefits of participation in the single market without being subject to its rules. Bank of England Governor Mark Carney faced calls for resignation after he identified a vote to leave as the largest single domestic threat to the economy.
“I cannot see any circumstance in which the U.K. could benefit from the single market without observing its regulations,” Noyer said. “Nor do I see the possibility of associating the U.K. in designing these regulations if it is no longer in the EU.”
The article is the abridged version of a speech Noyer first delivered in London on March 3.
Turnover in the U.K., the biggest center for foreign-exchange dealing, averaged $2.15 trillion per day in October, according to Bank of England data. Trading of euro-dollar, the most actively traded currency pair, was $640 billion.
The ECB lost a court case to have all clearing of euro-denominated trades located in the euro area. The EU General Court in Luxembourg ruled in 2015 that this was not in the central bank’s power and a change in EU law was required to win those rights.
The situation could change if the U.K. were to exit the bloc for good.
“It is already very difficult for euro members to accept that our currency is largely traded outside the currency area, beyond the control of the ECB and of euro area institutions such as market regulators,” Noyer said. “That can be acceptable only if, and as long as, the U.K. is a member of the EU, and accepts the involvement of, and co-operation with, the European regulatory agencies.”
Noyer retired from the Bank of France in 2015. He was also chairman of the Bank for International Settlements.