Andrew Bailey has warned Brussels against “seeking to fragment the international system” after commissioners vowed to cut off access to the City’s £80 trillion clearing market.

The Governor of the Bank of England urged the European Union not to end Continental banks’ access to London in 2025, saying any attempt to snatch business away from the Square Mile would go against the two sides’ “shared deep commitment to open markets”.

He also vowed to press ahead with an overhaul of regulations to make them more appropriate for post-Brexit Britain.

Clearing houses act as middlemen in derivatives trades between banks and have become a vital part of the financial system since the 2008 financial crisis.

Rivals such as Paris have long coveted the City’s euro-denominated clearing business, which accounts for around a quarter of London’s total trade in the market, and used Brexit as an opportunity to demand that it shifted back inside the European Union.

Brussels initially intended to cut off access in 2020, but this has been repeatedly delayed owing to concerns about financial stability.

This week, commissioners vowed to punish banks that fail to shift lucrative clearing business to the Continent, and insisted that the deadline will not be pushed back again.

But speaking at an annual dinner organised by lobby group TheCityUK, Mr Bailey said: “We will continue to work in strong cooperation with EU authorities to ensure risks in clearing houses are well managed, as we do with other authorities in other countries.

“But I have to say that maintaining a shared deep commitment to open markets and open financial systems with strong and appropriate regulatory standards and cooperation to support them means that there need be no time limit to this equivalence.”

The EU has deemed the US regulatory regime to be equivalent on a more permanent basis, despite the UK having identical rules to Brussels.

The Commission is consulting on ways to push businesses and banks on the continent to use clearing houses in the EU, including imposing financial penalties on those which defy it.

Other options on the table include simply blocking them from using the UK clearing houses, even though they currently offer the best service.

Mr Bailey has previously warned that fragmenting the system will drive up costs for financiers, businesses and households, as clearing works most efficiently and cheaply at scale, so carving up the system undermines these benefits and poses a risk to financial stability.

The market underpins products used by millions of consumers, such as fixed-rate mortgages.

Mr Bailey also made clear that the City’s global pre-eminence in finance meant that Britain should be “closely involved in shaping international standards”.

However, he added that the country is ready to overhaul and potentially change European financial rules if it suited the national interest. 

The Governor said: “Post-Brexit, it is necessary that we review and, where appropriate, revise the regulatory system to make it consistent with our UK-specific objectives.” 

His comments come a day after a Cabinet reshuffle placed Jacob Rees-Mogg in charge of delivering regulatory benefits from Brexit.

Mr Bailey flagged up the European Union’s Solvency 2 regime – criticised by insurers for its burdensome capital requirements – as a target for reform.

He said: “I do not for a moment consider that the Solvency 2 we transposed from EU law and regulation is best suited to the UK. Why would it be, since it was designed to cover 27 countries? The case for reform is clear.”

Mr Bailey’s speech steered away from monetary policy, following his controversial remarks last week that workers should not ask for big pay rises despite inflation set to peak at a 30-year high of 7.25pc in April.