Europe’s top securities watchdog wants London-based hedge funds and asset managers to prove they have built up a presence in the European Union after Brexit.

Battle focuses on what EU sees as bloc’s over-reliance on London’s clearing houses handling euro-denominated derivatives.

This is the latest move in an ongoing battle from EU regulators to ensure more financial services business moves back to the bloc after the UK's split with the EU.

Mandatory clearing of derivatives contracts by pension funds in the European Union should start in June 2023, helping the bloc to cut reliance on London, the EU's securities watchdog said on Tuesday.

Close scrutiny of UK financial firms’ European Union outposts will continue indefinitely, the bloc’s securities watchdog said, as regulators begin a round of new checks on how they are operating.

To avoid unfair competition, the bloc's markets regulator promises to closely examine British-based financial firms.