McCreevy plots clearing and settlement conclave

By Stewart Fleming

Date: 02/02/06

Charlie McCreevy, the European commissioner for the internal market, has called a meeting of chief executives of Europe's top 20 banks to discuss the future of the Union's clearing and settlement systems, the plumbing which keeps money flowing through the financial markets.

Invitiations have been sent to top bankers such as Michel Pébereau, chairman of BNP Paribas, and Josef Ackermann, his opposite number at Deutsche Bank. "This is potentially a very important meeting," said a top official at one financial institution involved in the EU clearing and settlement system. "If I were McCreevy, I would be asking these executives from banks who are spending millions on the EU's inefficient cross-border systems, how they believe they can be streamlined. He should also ask them whether or not an EU directive is needed to do this job, and if so what it should include," he added.

According to people familiar with the invitation, McCreevy has not invited representatives of suppliers of clearing and settlement services such as Euroclear and Clearstream, so the discussion will only be between users. According to an executive from one bank which will be participating, the invited banks are trying to hammer out common positions ahead of the meeting. But in a sign of national sensitivities on the issue, the co-ordination is not happening EU-wide, but within national groups.

Improving cross-border clearing and settlement systems is widely recognised as vital to the creation of a more efficient cross-border capital market.

Three years ago a Commission advisory committee, the Giovannini Group, identified fifteen barriers to progress. The bankers are likely to point out that several of these still require action, not by financial market participants, but by member state governments.

A major policy decision for McCreevy and the Commission is whether and how to address complaints about Deutsche Börse (DB), the company that owns the German stock exchange.

DB also operates a clearing and settlement system which, in the eyes of the UK's Competition Commission, is potentially anti-competitive. The commission made its views public in its report on the proposed takeover bids for the London Stock Exchange (LSE) from DB and Euronext, its Paris-dominated European rival. Euronext too would have to make changes in its business model in order to acquire the LSE.

Underlying the jockeying for position over the reform of the clearing and settlement system and the bid for the LSE is the rivalry between the British, French and German governments over the future of London, Paris and Frankfurt as European financial centres.

London has consolidated its position as Europe's dominant financial centre in the past ten years, in spite of the launch of the euro, in part because of the strong presence of foreign, particularly American, banks.

But neither Paris nor Frankfurt wishes to see this dominance increase or to see American investment banks serving their domestic markets from their London base at the expense of national financial institutions.

• Stewart Fleming is a freelance journalist based in Brussels

Article anticipates a meeting between Charlie McCreevy, the European Commissioner for the Internal Market and Services and the Chief Executives of Europe's top 20 banks to discuss the future of the Union's clearing and settlement system. Improving cross-border clearing and settlement systems was widely recognised as vital to the creation of a more efficient cross-border capital market.

European Commission: DG Internal Market: Financial Services: Financial Market Infrastructures: Clearing and settlement http://ec.europa.eu/internal_market/financial-markets/clearing/index_en.htm

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