Christopher Giancarlo, acting chairman of the US Commodity Futures Trading Commission, said on Wednesday that Brussels' plan to control euro-clearing post-Brexit should be handled with 'care'

The United States has warned European Union officials that forcing a lucrative London business to Europe post-Brexit could result in an international financial trade war.

Christopher Giancarlo, acting chairman of the US Commodity Futures Trading Commission, said on Wednesday that Brussels' plan to control euro-clearing post-Brexit would 'undoubtedly inform the evolution of US regulatory policy'.

The EU revealed earlier this month that it is looking at whether euro-denominated clearing, an activity dominated by London, should be moved to the single currency area after Britain leaves the bloc in 2019.

Giancarlo warned that the EU should proceed with 'care'.

'To date, the US has not deemed a body of water - even as large as the Atlantic Ocean - as an impediment to effective CCP supervision and examination,' Giancarlo said.

The issue is politically sensitive at a time when Britain and the EU embark on divorce talks, with legislative proposals on clearing due from Brussels next month.

In financial markets, clearing is the business of acting as an intermediary in a trade to reduce the risks from defaults by ensuring funds are delivered to the seller.

Some 75 per cent of euro-denominated interest rate derivatives are cleared in the UK - and tens of thousands of jobs depend on the $1trillion business.

Giancarlo told the annual conference of global derivatives industry body, ISDA, that he was respectful of the fact that 'this is an important regulatory policy decision that needs to be made with care by European officials'.

Giancarlo also drew attention to the European Commission's consideration of a less radical option than moving clearing from London, which would involve tighter supervision of foreign clearing houses that handle large amounts of euro clearing.

A clearing house or central counterparty (CCP) stands between two sides of a trade, ensuring its completion even if one side goes bust.

The issue is politically sensitive at a time when Britain and the EU embark on divorce talks, with legislative proposals on clearing due from Brussels next month. Pictured above, European Chief Negotiator for Brexit Michael Barnier delivers an address in Dublin on Thursday

The CFTC has a lot of experience in the supervision of clearing houses both in the United States and abroad, Giancarlo said.

'We welcome the opportunity to discuss the CFTC's experience with officials in Europe.'

He also said that given the closeness of the US and European derivatives markets, what Europe decided 'undoubtedly will inform the evolution of US regulatory policy for cross-border swaps clearing.'

Giancarlo called for changes to the 'supplemental' leverage ratio, or SLR, that the world's top banks must comply with.

The SLR, designed by global regulators, is based on a 'flawed understanding' of how clearing works and harmed market liquidity, he said. A leverage ratio is a measure of capital to a bank's assets on a non-risk weighted basis.

Giancarlo said the SLR should not include cash posted by bank's customers to back trades, and changes could contribute to a big saving in capital costs for banks, and potentially a three-fold increase in trading activity.

It was critical that global regulators check if rules introduced since the 2007-09 financial crisis have made the financial system effective in supporting growth, he said.

'Flourishing capital markets are the answer to global economic woes, not diminished trading and risk transfer.'