luis de guindos : europe ’ s role in the global financial system keynote speech by mr luis de guindos, vice - president of the european central bank, at the suerf / netherlands bank conference “ forging a new future between the uk and the eu ”, amsterdam, 8 january 2020. * * * it is my pleasure to deliver the keynote speech at this year ’ s suerf / dnb conference. the title of this conference is very apt. brexit will certainly require a new future to be forged between the united kingdom and the eu. the united kingdom ’ s departure has important implications for the eu financial system, most notably for capital markets. so we need to give serious thought to optimally shaping the future relationship between our financial sectors in the awareness that london, though likely to remain an important global financial centre, will become less integrated with eu markets and firms. we will also need to step up our efforts to further develop the eu ’ s domestic capacity in capital market activities, so as to avoid a brexit - induced increase in financial fragmentation, while at the same time ensuring that the united kingdom and eu member states do not engage in a race to the bottom on regulation. taking up the theme of the conference, i would first like to focus on how to forge a new future between the united kingdom and the eu with regard to some key financial activities. i will then turn to the much - needed drive to strengthen the european financial system by completing the capital markets union and banking union. london ’ s pre - eminence in certain key financial market segments for decades, europe ’ s leading financial centre has been the city of london and, in some notable areas, the eu ’ s financial ecosystem has relied heavily on services provided by uk - based banks and market infrastructures. derivatives clearing – a critical segment of financial markets – is a striking example. as of december 2019, almost 90 % of all over - the - counter ( otc ) derivatives positions taken by euro area institutions were cleared at uk global clearing houses. derivatives clearing is not the only example, however. large investment banks operating from london play a significant role in euro area bilateral otc derivatives markets. in august last year, over a quarter of uncleared otc derivatives held by euro area institutions were sourced from the united kingdom. while the activities of these investment banks were considered unlikely to create financial stability risks in a hard brexit scenario ( also thanks to the temporary measures taken by eu

automatic right to equivalence. for other types of financial activities, no specific regime for accessing eu markets has been established. this is not unusual : most if not all countries place some restrictions on the types of financial services that can be provided across their borders. there may be good reasons for these restrictions, such as consumer protection or financial stability considerations. in the case of the eu, certain bank lending and deposit - taking activities are not covered by the so - called 2 / 5 bis central bankers'speeches third - country regimes and so will no longer be able to be provided from the united kingdom, but will need to be provided from within the eu. this – together with the fact that equivalence cannot be taken for granted – is why many banks have chosen to relocate activities to the eu27, and have been engaged in very detailed discussions with the ecb and other authorities to obtain agreement on their plans. the ecb expects banks to build up their capabilities in eu27 countries and to implement the agreed relocation plans within the previously agreed timelines. the risks of financial fragmentation regulatory drivers – and in particular the end of passporting rights for certain uk - based activities – are already having an effect on the geography of financial centres in the euro area. according to preliminary evidence, a small number of financial hubs appear to be emerging as a result of the relocation – or plans for relocation – of certain activities. most incoming banks have indicated germany, ireland, the netherlands or france as their new main location in the euro area. this pattern also seems to apply to the relocation of activities beyond banking. public statements and market intelligence suggest that a sizeable fraction of asset management firms and insurance companies that are relocating activities from the united kingdom as a result of brexit have moved to either ireland or luxembourg. and speaking here in amsterdam, i should note that the netherlands is attracting a substantial amount of trading platforms, exchanges and fintech companies. the persistence of such dynamics, and the emergence of a clearly multi - centric euro area financial system, could raise a number of challenges. in particular, without further progress on banking and capital markets union, a more fragmented financial structure could affect the ability of investors and companies from a country experiencing a negative shock to access investment and funding opportunities in unaffected countries ( private risk - sharing ). it could also create regulatory and supervisory challenges : domestic capital markets within the eu are currently subject to national rules and supervision ; the differences in regimes could further inhibit the integration of markets and perhaps inc