Brexit will raise costs and fragment clearing: Euronext CEO

[LONDON] Euronext NV Chief Executive Officer Stephane Boujnah said people should expect costs and fragmentation of the financial industry stemming from the UK's departure from the European Union.

London's dominant role in clearing euro derivatives is one of the most vulnerable dominoes in the UK's finance industry and will be fought over in the looming Brexit negotiations. Euronext, which operates markets in Amsterdam, Brussels, Lisbon and Paris, has said Brexit will likely diminish London's role as a global financial center and may create opportunities for the company to win business.

"There will be consequences associated in financial markets to Brexit, and those consequences will probably be much stronger and go much deeper than anticipated or than many people would like it to be," Mr Boujnah said in a Bloomberg interview on Friday after the company reported first-quarter earnings. "Clearly, there is no way leaders in charge of financial stability within the euro zone are going to accept a situation where decisions taken outside the euro zone can have impact within the euro zone on issues that are as fundamental as clearing."

French and German leaders have taken aim at London's dominant role in clearing euro derivatives, even before the Brexit vote. UK officials have warned that shifting clearing from London could be damaging and destabilizing.

Mr Boujnah's comments echo those of European Central Bank Executive Board member Yves Mersch, who said Thursday that the transition to a new clearing landscape could raise operational challenges, potentially increasing clearing costs.

"London has decided to move away from the implicit federal ambition, and the strong regulatory convergence," Mr Boujnah said. "So things will be different going forward. So there will be costs associated with that fragmentation."

BLOOMBERG