France takes aim at London’s dominance in euro trade

The City of London

The City of London

The City of London should no longer be the euro's main financial centre so the eurozone can "control" most financial business in the region, France's central bank governor said in an interview published on Monday (3 December).

Banque de France Governor Christian Noyer said there was "no rationale" for allowing the UK to be the "offshore" financial hub of the eurozone.

"Most of the euro business should be done inside the euro area. It's linked to the capacity of the central bank to provide liquidity and ensure oversight of its own currency," Noyer told the Financial Times while touring Asia to promote Paris as a trading centre for China's renminbi currency.

"We're not against some business being done in London, but the bulk of the business should be under our control," Noyer continued.

"That's the consequence of the choice by the UK to remain outside the euro area."

The comments from the central banker, who is also a member of the European Central Bank's governing council, may arouse UK fears of a eurozone plot to end London's status as Europe's financial centre.

Britain is demanding safeguards to prevent the European Central Bank from highjacking the regulatory agenda and imposing rules on EU countries that are not in the single currency as the eurozone moves towards a banking union.

A report circulated last week by EU officials flagged British demands for what many see as a veto over the proposed scheme.

Diplomats are trying to broker compromise with London, which wants to change voting rules for when regulators from across the European Union meet to flesh out EU law, on issues such as defining the type of capital banks can use.

Britain wants to see a double vote take place – one for those in the banking union and another for non-euro countries outside – before any final decision.

At a summit in October, European Union leaders agreed plans to complete the European banking union by January 2014, after the general elections in Germany.

>> Read: EU summit deal aims for full 'banking union' in 2014

The concession was made to German Chancellor Angela Merkel who argued for "quality" over "speed" in putting in place the new supervisory system, seen as a cornerstone of the EU's efforts to end the eurozone' sovereign debt crisis.

The summit deal confirmed the objective of agreeing the legal framework by 1 January 2013.

Once this is agreed, the single supervisory mechanism (SSM) could probably be effectively operational in the course of 2013, the European Commission said.

  • By end 2012: EU objective is to agree the legislative framework for a banking union
  • 2013: Single supervisory framework could become effective
  • By 1 Jan. 2014: Banking union to be fully in place

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