There has been much debate over the political cleanup efforts following the major banking and financial crisis – both regarding the extent of the crisis and the specific measures taken. Some decry a "regulatory tsunami", while others mock that the "casino" has reopened without any real lessons learned. Nevertheless, there is general consensus that banks and capital markets are now more resilient than before the Lehman collapse, thanks to Basel III and CRD IV, unified supervision, and unified resolution mechanisms.

Rarely does the debate on the correct lessons learned involve the EU Derivatives Regulation, Emir. This is a fatal underestimation. The stabilizing effect of clearing standardized derivatives, which was mandated by Emir, is too often overlooked. The involvement of central counterparties and a sophisticated system of margin requirements and collateral calls have ensured that in recent years – even during periods of market stress – there have been no significant disruptions or chain reactions.

Conversely, this also means that clearing houses, due to their outstanding importance for financial stability, must be closely and effectively supervised. However, how can this be achieved when the majority of clearing of exchange-traded transactions occurs in London? European lawmakers have grappled with this question long before Brexit. Even today, EU institutions lament the "persistent risks to financial stability" resulting from the "excessive concentration" of clearing in some third-country central counterparties – as evidenced in the current Emir amendment. The awareness of the problem exists.

Recently, European lawmakers agreed on the amendment to the EU Derivatives Regulation. The fact that an agreement was reached at all is already a success. The requirement for relevant market participants to maintain an "active account" within the EU is also a step in the right direction. Nonetheless, 40% of participants in the European interest rate and swap markets are still not connected to a central counterparty within the EU. So far, so good.

Nevertheless, the new framework remains a mere hopeful prospect for now. Whether the requirements will trigger a shift away from the London Clearing House towards Eurex is uncertain. Additionally, whether Frankfurt can establish itself as an active second liquidity pool alongside London and can actually absorb business on a large scale in a crisis, if quickly shifted from the island to the continent, remains to be seen. Especially since not only investment banks and funds but also governments like the French have undermined quantitative minimum thresholds for Euro clearing within the EU. Now, extremely complicated rules for calculation have been agreed upon, raising questions about their effectiveness.

Members of Parliament and governments must consider whether the European Union should not insist much more strictly on relocating the clearing of Euro interest rate contracts within its jurisdiction. This is not primarily about business interests. While the revenues from Euro clearing are attractive, they are not crucial for the participating exchanges. Much more important is the question of financial stability, as there is still a leak. The dependence on British supervision would become highly problematic if a clearing house like LCH were to falter. In such a scenario, EU market participants would have to provide enormous amounts of liquidity, but EU political institutions would hardly be involved in crisis management. The political price for banks and funds wanting to stick to clearing in London, in anticipation of permanent cost advantages and netting benefits, is therefore quite high. Moreover, from a risk perspective, it would be better to distribute liquidity across multiple pools in any case.