Andrew Bailey promises to fight against Brussels’ seizure of power over the City Business

As a result, there is speculation that the EU might try to legislate to force more non-European companies to leave London and move on to the single market, or to encourage international companies to take such a step and thus win the 75 % remaining of the market.

Mr Bailey said: “Legislating extraterritorially is anyway controversial and obviously questionable legality frankly.

“So the most likely way to do it, which is in itself controversial, is to tell businesses that you need to move this activity to our area and if you don’t, we’ll think of something else to do. And that would be very controversial. I think that would be a very serious escalation of the problem.

Eurozone politicians have long coveted London’s financial might and looked for ways to force companies into the currency bloc even when the UK was a member of the EU, resulting in lengthy legal battles over the rules.

Brexit appears to have sparked the last argument, although Mr Bailey noted that the UK and the EU both follow globally set guidelines. The EU also considers New York’s clearing houses to be equivalent, although there was a much larger gap between EU and US rules than the bloc with the UK.

Earlier this month, Mr Bailey gave a keynote address to the financial sector warning that the European Union is on the verge of locking Britain out of its banking market by refusing to grant widespread access to the market in other areas through its equivalency regime, to an extent that would push up financial costs for millions of consumers on both sides of the Channel.

“I don’t think there is a valid financial stability argument at all” for forcing compensation out of the UK, Mr Bailey said.

He added: “It’s about saying, do we have a set of rules for clearing houses that provide security, soundness and financial stability, and the answer is yes.”