Coronavirus: Euroclear faces backlash over trebling of fees

Euroclear, one of the world’s largest settlement houses for financial transactions, is facing a furious backlash from investors over a plan to hike fees for protecting assets during the coronavirus pandemic.

Sky News has learnt that Euroclear UK and Ireland (EUI) has informed customers that it plans to triple its asset maintenance charges for domestic equities and debt instruments from 1 April.

The changes, which were communicated to users of its services just two weeks ago, would be expected to generate tens of millions of pounds in additional revenue for the company at a time of extreme volatility in global markets.

If implemented, the revised fee structure would impact asset managers, the custodians of financial assets and stockbrokers – including the retail stockbrokers which count millions of ordinary British savers among their customers.

It would come at a time when many companies are in severe distress because of the pandemic, and when investors are likely to be deluged with requests to help them raise enough capital to survive.

One institutional investor suggested there could be a case for competition watchdogs to investigate the price increase if it was implemented during the COVID-19 crisis.

The Competition and Markets Authority has signalled that it will investigate any evidence of “price-gouging” or other measures to exploit the coronavirus outbreak for commercial gain.

In a statement issued to Sky News, a Euroclear spokesman said: “We can clarify that there is no change to pricing on UK equity transactions in Euroclear UK and Ireland.

“In light of current market circumstances, we are evaluating implementations and roll-outs of various projects.”

A source close to the company said the angry response of market participants to its proposals could result in the changes being delayed.

Any decision about that would be subject to EUI’s normal governance processes, the source added.

The bulk of EUI’s income is derived from settlement charges, which the company is not proposing to change next month.

Asset maintenance charges are designed to ensure that investors’ assets are secure, protected and serviced adequately.

New regulatory requirements meant that EUI was required to increase investment in areas such as cybersecurity, data maintenance and financial crime prevention, the source close to EUI said.

“It is more expensive to operate this particular service today, so we have worked with clients to review the pricing structures,” they added.

“EUI has not changed prices since 2012, so we are still very cost-effective.”

Euroclear is owned by a disparate group of financial institutions, including banks, the London Stock Exchange Group and Intercontinental Exchanges, the owner of the New York Stock Exchange.

It is one of the world’s largest settlers of financial transactions, and boasts that it holds assets valued at €31trn (£27trn).

It process securities transactions globally worth a staggering €837trn (£731trn).

The company, which is based in Belgium, had been exploring a partial sale that could value it at roughly £5bn, but has put the process on hold.