Deutsche Bank AG and UniCredit SpA last month moved some of their swaps trades from London to Frankfurt, Germany, as banks used a lull in the ongoing Brexit drama to prepare for the worst.
About 10 banks took part in a switching run, in which lenders closed existing swaps positions in the UK and opened equivalent ones in Germany, people familiar with the matter said.
Some of the banks, including JPMorgan Chase & Co and Commerzbank AG, acted as market makers, treating the exercise as an opportunity to generate revenue by trading with the banks.
Photo: Reuters
Continental European banks would be unable to keep their swaps — a widely used type of derivative — in London from April next year if the UK leaves the EU without a deal.
That could force the banks to move trillions of US dollars of derivatives from LCH Ltd, a unit of London Stock Exchange Group PLC (LSE), to Frankfurt’s Eurex Clearing, part of Deutsche Boerse AG.
As well as helping Deutsche Boerse at the expense of LSE, such a move would erode London’s dominance as Europe’s financial center — and potentially roil the market for interest-rate swaps.
Deutsche Bank and UniCredit declined to comment, as did spokespeople for JPMorgan and Commerzbank.
Bayerische Landesbank, which also shifted some swaps to Frankfurt, and the Bank of England, LCH’s primary regulator, also declined to comment.
LCH holds more than 100 billion euros (US$111 billion) of cash and bonds on behalf of banks and fund managers seeking to protect their swap trades against the possibility that a major trading firm will default.
The European Commission saved LCH from having to kick out its EU-based clients at the end of last year, when it extended the London-based clearing house’s right to provide services to continental firms until the end of March next year.
Banks can continue to buy and sell LCH-branded swaps even if the UK leaves the EU without a deal at the end of October — the current scheduled date for Brexit.
Unless the commission further extends LCH’s ability to serve EU banks, those firms would have to move their swaps positions somewhere else before April next year.
‘ACCORDING TO PLAN’: A company official said that it has set up production sites worldwide to provide services and that its Wisconsin project was going smoothly Hon Hai Precision Industry Co’s (鴻海精密) smart manufacturing center in Wisconsin would begin trial manufacturing in the middle of this year, the company said yesterday, adding that it plans to build a research institute to develop key technologies to support growth over the next five years. Hon Hai, known internationally as Foxconn Technology Group (富士康科技集團), said in an annual report submitted to the Taiwan Stock Exchange that its planned Foxconn Institute for Research in Science and Technology would conduct research into artificial intelligence, next-generation communications, quantum computing, cybersecurity and nano semiconductors in Taiwan. Hon Hai is to make products at the center
TV and online retailer Momo.com Inc (富邦媒體) yesterday said it has set up a new logistics subsidiary, Fu Sheng Logistics Co (富昇物流), to oversee the company’s extensive shipping operations. Leveraging Momo’s 23 satellite warehouses and distribution centers nationwide, Fu Sheng will be in charge of executing the retailer’s same-day shipment plan for deliveries in Taipei, New Taipei City, Taoyuan, Taichung, Tainan and Kaohsiung, Momo said in a press release. Seeking to further shorten its supply chain, the company is to set up another seven satellite warehouses and distribution centers by the end of the year. “Fu Sheng has a fleet of 200 couriers
E Ink Holdings Inc (元太科技), the world’s sole supplier of e-paper displays for e-readers and shelf labels, posted its best quarterly net profit for the first quarter in nine years amid increased demand during a traditionally slow season. Net profit soared 80 percent to NT$787 million (US$26.23 million) in the quarter ended March 31, compared with NT$438 million a year earlier. That translated into earnings per share of NT$0.69, up from NT$0.39. E Ink posted lower royalty income of NT$371.23 million last quarter from NT$448.74 million a year earlier, a company financial statement showed. E Ink said that it expects royalty income to
The latest US government action against Huawei Technologies Co (華為) takes direct aim the company’s HiSilicon (海思) chip division — a business that in over the past few years has become central to China’s ambitions in semiconductor technology, but is now to lose access to tools that are central to its success. That could make it the most damaging measure by the US yet against a Chinese company. On Wednesday, US officials told reporters that the Huawei’s chip division functioned as a “tool of strategic influence” for the Chinese Communist Party. Huawei, for its part, denounced the US allegations and called the
RSS