Latest posts by Anastasia Moroz (see all)
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- Members of Parliament enabled to block Brexit - 03 Nov 2016
If Brexit does drive bankers out of London, the ultimate winner might be located 3,500 miles away from the European borders.
Politicians and industry CEOs revealed that at this point, New York is a top candidate for becoming a new home for London banks in case London’s finance industry is dramatically affected by Britain’s exit from the European Union.
That is due to the fact that the largest U.S. city is the only place rivaling the depth of markets, breadth of expertise, or regulatory appeal boasted by London.
Continental Europe might get hold of some bank operations for the sake of regional rules ensuring time-zone-friendly access to its market, but the biggest piece of the cake will eventually be moved across the Atlantic Ocean.
John Nelson, chairman of Lloyd’s London, stated in his interview: “There is no way in the EU there is a center with the infrastructure or regulatory infrastructure to take the role London has. There is only one city in the world that can, and that is New York.”
For the majority of investment banks, London is the biggest headquarter. If in the aftermath of Brexit the banks shift to Europe, the situation for the City will become even more deplorable as banks might seek to cut their London operations even by a greater margin and move employees, whose performance is not affected by a time zone, alongside. That would also include global-facing roles in merger advisory, trading and back-office technology and finance.
Xavier Rolet, the London Stock Exchange Group Plc CEO, openly announced that if London is deprived of its ability to clear euro derivatives trades, the whole business will swap the City for the only option capable of clearing all 17 major currencies: New York.
This month at the conference in Washington James Gorman, CEO of Morgan Stanley, said that the winner from Brexit was definitely going to be New York. “You’ll see more business moving to New York,” he said.
A senior banker at one major Wall Street bank, who asked to stay anonymous, reported that the bank has already started its reallocation campaign of the U.K. workforce, and will most probably wind up moving numerous non-essential staff out of Europe to the U.S. or Asia.
The executive sated that New York, currently a centre for dollar-denominated securities, could entice over to its side trading desks using London as a base for macro trading, speculating on currencies, bonds and economic trends all over the world.
Hope fading away
Bank bosses have lost any faith that the Prime Minister Theresa May would strike a post-Brexit deal preserving the right to sell goods and conduct operations around the EU, three people with knowledge of their contingency plans have reported.
The main complication they encounter is that it’s difficult to live up to London’s advantages. The majority of EU regulators are unlikely to be able to handle an influx of investment-bank license applications, and many locations do not possess the required real estate, infrastructure or life quality.
When this year London took a leading position of the Z/Yen Group’s index for financial hubs based on their appeal to employees in the sector, New York was a runner-up, ahead of 19th-place Frankfurt and Paris ranking 29th.
A research by New Financial stated that if the finance industry does swap London for some other EU option, it will most likely come apart. That is a thorn in the flesh for U.S. banks, which have spent over 2 decades centralizing European operations within the so-called Square Mile. The U.K. is a home to 87% of U.S. investment banks’ EU workforce and 78% of the region’s capital-markets activity, according to research firm New Financial.