REUTERS/Stefan Wermuth

LONDON (Reuters) - Splitting Europe’s market for clearing euro-denominated derivatives would bump up costs for users and do little to improve financial stability, Bank of England Governor Mark Carney said on Tuesday.

Regulators should instead work with each other to forge a new form of cross-border supervision of clearing houses, Carney said.

“Fragmentation is in no one’s economic interest. Nor is it necessary for financial stability. Indeed it can damage it,” Carney said in a speech in London’s Mansion House.

Last week the European Union’s executive European Commission proposed giving itself powers to move euro clearing business away from London after Britain leaves the bloc in 2019.

It said such powers might be needed to maintain financial stability in the EU given that the bulk of euro clearing takes place in London, where it is regulated by the BoE.

Carney said fragmentation of such global markets by jurisdiction or currency would reduce the benefits of central clearing, which ensures the safe completion of a trade.

Instead of forced relocation, authorities “can and should build on current models to develop a new form of regulatory and supervisory cooperation,” Carney said.

“The European Commission’s proposals announced last week recognise the importance of effective cooperation arrangements between the relevant EU authorities and their overseas counterparts,” Carney said.

“The Bank welcomes this.”