European Central Bank reportedly wants to crack down on a practice known as "back-to-back" booking after Brexit.

The process effectively sees banks and other institutions carry out business in one market, but book that activity in another.

Many in the City believed the continued use of back-to-back booking would have helped London retain its European financial crown after Brexit.

The European Central Bank reportedly wants to crack down on a practice that many in the City believe would have helped London retain its European financial crown after Brexit.

The ECB has written to major financial institutions to urge them to decrease their reliance on the use of the so-called "back-to-back" booking of trades and loans, according to a report in the Financial Times on Monday.

The process effectively sees banks and other institutions carry out business in one market, but book that activity in another. For example, a bank might carry out a piece of business in Paris, but transact it in London.

Many financial institutions have reportedly been planning on using back-to-back booking as a means of continuing to centralize many of their European activities in London even after the UK loses its financial "passporting" rights during Brexit.

The ECB, however, appears to be pouring cold water on these plans. The FT's report suggests that the ECB will give financial institutions until 2022 to "limit their reliance" on the use of the practice.

This hard stance on back-to-back trades from the ECB, which is now the ultimate arbiter of European banking regulations, seems to be at odds with the words of Andrea Enria, the head of the European Banking Authority.

Banks "may use back-to-back transactions or intragroup transactions to transfer a part of the risks to a non-EU-EEA entity," Enria said in an interview with the FT in September, adding that there would be "no ban" on back-to-back booking.

The ECB's apparent clampdown on back-to-back booking could be bad news for major financial institutions that were planning on using the system as a means of keeping large sections of their EU business in operation from the UK after Brexit, and could increase the number of staff banks need to move from London.

After early predictions of top losses in the tens of thousands for the City, most financial institutions have pulled back from such forecasts, with major lenders currently expecting to move just hundreds of staff to other European financial centres — including Dublin, Frankfurt, and Paris — on day one of Brexit.