The EU on Tuesday is to unveil new rules that could require a huge slice of London's banking business to leave after Brexit in a blow to the city's supremacy as a global financial hub.

If confirmed, the rules would be seen as a hostile move against Britain ahead of coming Brexit negotiations only days after Prime Minister Theresa May embarrassingly lost her majority in British elections.

The draft law to be unveiled by European Commission vice-president Valdis Dombrovskis could deny post-Brexit London the right to host financial market "clearing houses" that deal in euros, the EU's single currency.

Clearing houses are a key part of the financial system's plumbing, with trillions of euros being handled every year, mostly out of London.

The issue of whether euro clearing houses can remain in the British capital is set to be one of the most contentious issues when Britain negotiates its future trade relationship with the EU after its departure.

Britain has jealously guarded dominance of the clearing house sector in Europe and won an EU court decision in 2015 against the European Central Bank in order to keep hosting the euro deals.

Amid the heated lobbying, the EU last month said it was exploring several options on the issue including the possibility that Britain maintain euro-clearing, while accepting strict Brussels oversight.

The London Stock Exchange has bitterly objected to relocation in a sign that any forced move out of the UK could be highly damaging to its business.

"It's going to be complete chaos. This has not been properly thought through," LSE chief executive Xavier Rolet told the Sunday Telegraph.

In a letter to Dombrovskis, the International Swaps and Derivatives Association said any move to an EU country would drive up costs for the financial sector.

A relocation could "heighten financial stability concerns", the powerful lobby added, with traders and banks struggling to find new homes for their operations.

Last week the Futures Industry Association, a US and UK-linked lobby, warned that forced relocation to the EU would require a near doubling of the $83 billion finance companies set aside in case of contract defaults.

This figure however has been dismissed by Frankfurt-based Eurex Clearing, owned by Deutsche Boerse.

London lobbyists also argue in the event of an EU ordered exile from Britain, only Wall Street or Asia would benefit.

Forcing a move out of London, "would ultimately be detrimental" and "is in no one's interest," Miles Celic, chief executive of the TheCityUK, said last month.