At a recent finance summit in Frankfurt, the Treasury’s director general of financial services in the UK, Katherine Braddock, warned that a second wave of bank moves from London was “likely after Brexit.”
The UK’s loss of ‘passporting rights’, the means by which UK based institutions are currently able to trade freely with Europe, after Brexit, has already seen some companies transferring jobs and offices to other European cities, mainly Frankfurt, Paris and Dublin, although the director general was keen to play down the scale of the exodus.
Plans are already afoot by some UK banks to establish new post Brexit hubs in Europe. One company in Frankfurt, Frankfurt Main Finance has already estimated that up to 25,000 jobs could leave London and almost half of them predicted to head for Germany. However, Ms Braddock told the conference that research done by consultants put the figure at more like 10,000
She said, “What we see in the UK is an initial set of moves which are to do with essentially hedging the immediate risks to ensure that clients and boards can be assured that services continue in a way that is not only undisrupted, but completely sound from a regulatory and legal standpoint. And that first phase of moves is, I think, relatively confined.”
Indicating that a second wave of relocations was likely, depending on clarification of the future regulatory framework, she went on, “Depending on the relationship that we achieve with the European Union – and, of course, our aspiration is a very close relationship on financial services – that will determine the scale of that second phase and, to me, that’s currently unknown.”
Also at the conference, the former president of Eurogroup, the eurozone finance ministers’ body, Jeroen Dijsselbloem said that he hoped there would be the closest collaboration between EU and British regulators after Brexit to minimise divergence and make the financial system stable. “Banking union must be absolute priority,” he said.
However, recent reports in the media have said that there is some disagreement between the Treasury and the Bank of England over how the landscape should look post Brexit. It was reported that the Chancellor, Philip Hammond and the Bank of England were in disagreement over the future course this should take.
In a Financial Times article, it was reported that Philip Hammond wants to keep Britain close to the EU rule book to ensure maximum access for City institutions to the European market, while the BoE is opposing any compromise that would leave it as ‘a rule taker’.”
The article continued, “A fragile truce between the Treasury and the central bank has been shattered by the growing fear in London that the EU will not accept Britain’s original proposal for City regulation — a ‘mutual recognition’ plan that would have given the BoE the regulatory autonomy it seeks. “That proposal was declared dead at the outset by EU chief negotiator Michel Barnier. The search for a Plan B has generated acrimony, with the BoE believing that Mr Hammond, in the hope of securing an EU trade agreement in financial services, is willing to sign up to a deal that would give Brussels significant sway over the City.”