GLOBAL BANKS BRACE FOR HARD BREXIT

Goldman Sachs and JPMorgan preparing most pessimistic contingency plans

GOLDMAN Sachs Group Inc and JPMorgan Chase & Co are bracing for a “hard Brexit” as they seek to protect their access to the European Union (EU) once Britain leaves the bloc in 2019, according to top executives.

“We are now assuming a hard Brexit with additional conservative assumptions,” said Faryar Shirzad, Goldman Sachs’s cohead of government affairs, on Saturday in Washington.

“Until we are told otherwise through tangible, meaningful, reliable declarations of some sort then we just have to keep moving forwards” with the most pessimistic contingency plans.

Also speaking in the United States capital during the annual meetings of the International Monetary Fund was Daniel Pinto, head of JPMorgan’s investment bank.

He, too, said he is readying for a “no-deal” scenario that doesn’t allow banks to easily conduct business across the continent from operations in London.

“We need to continue servicing clients, and so that’s what we are going for,” said Pinto. “Two years is a very short period of time.”

Brexit was a major topic as finance ministers, central bankers and executives from around the world gathered in recent days to discuss economic trends and risks.

Global banking leaders are growing concerned that the UK will spin out of the EU without a long-term trade deal in place.

That is prompting firms to explore alternate European locations, intensifying pressure on Prime Minister Theresa May to secure a transitional arrangement with the EU to extend existing trading rules until a permanent trade pact is sealed.

“Talk of a standstill arrangement is encouraging”, but Goldman Sachs wants to see evidence it would happen, said Shirzad.

Bundesbank executive board member Andreas Dombret, a fellow panelist, called a hard Brexit the most likely scenario, but said he doesn’t “see a financial-stability risk because that risk is materialising over a two-year period”.

Pinto said JPMorgan is already bolstering its use of offices in Frankfurt, Luxembourg and Dublin.

“We have been working on this for over a year now so we have a good plan and we are not expecting any client disruption,” he said.