Britain is to take legal action against the European Central Bank over plans to require institutions dealing in some euro-denominated financial products to be based in the euro-zone.
The Treasury will on Thursday formally confirm that it is mounting a legal challenge to the Bank's new "location policy" through the European Court of Justice, amid fears it could hit the City of London.
It is believed to be the first time an EU member state has taken legal action against the European Central Bank in this way.
A Treasury spokesman said: "This decision contravenes European law and fundamental single market principles by preventing the clearing of some financial products outside the euro area.
"That is why we have begun proceedings against the European Central Bank through the European Court of Justice.
"The Government wants to see this resolved swiftly and without involving the courts, but if necessary will not shy away from continuing legal action to make sure there is a level playing field across the EU for British businesses."