Barclays plans for Brexit ‘in dark’
• Bank forced to make changes without political clarity
Barclays is having to put plans in place for dealing with Britain’s divorce from the EU without clarity on how political negotiations will go, the bank’s CEO Jes Staley says.
The British lender said in July that it was talking to Irish regulators about extending its activities in Dublin in preparation for when Britain left the EU in March 2019.
The bank would relicense all of its branches in Europe so they became part of its Irish business but it was having to make these changes without clear direction from London or Brussels, Staley said on Wednesday.
“Like all of us, we are in sway to the desires and wishes of the political bodies and I have no idea how that will go. There is a clear recognition of the importance of the UK, but the political reality we all have to deal with is we will make adjustments.”
Goldman Sachs CEO Lloyd Blankfein made similar comments about the political uncertainty on Monday, when he said a lot of things were out of the bank’s control when it came to building up its new European headquarters in London.
Unless Britain negotiates new trading relations with the EU, banks, insurers and fund managers could be locked out of EU markets when it leaves.
Job losses totalling 75,000 in banking and insurance because of Brexit were plausible, Bank of England deputy governor Sam Woods said on Wednesday.
London dominates global currency trading and is Europe’s main finance hub. Overall the sector employs more than a million people across Britain.
Some firms have started to move staff out of London, while others are waiting until early 2018 to see if Britain and the EU agree transitional arrangements to smooth Brexit. Staley was, however, optimistic that London would remain at the centre of European capital markets.
“The capital markets are in London not because of Barclays, and not because of JPMorgan, not because of Goldman Sachs. They are here because the investors of free capital are by and large located in New York and London, and we want to be near our investors,” he said.
About 10,000 UK-based jobs were probably at risk on “day one” of Brexit, Woods, CEO of the Bank of England’s Prudential Regulation Authority, told the House of Lords, citing firms’ responses to the authority’s inquiries about contingency plans. “In terms of a long-term possibility amongst one of many scenarios, I regard that as within the plausible range,” Woods said of the estimate by management consulting firm Oliver Wyman.
“It’s a moving feast and we won’t know until we get there, but you could reasonably think of the day-one movement as perhaps around 10,000. I would be surprised if it ends up being more than that for banks and insurance companies.”
Oliver Wyman reached its estimate by looking at the portion of total revenue the UK obtains selling financial services to the EU and hypothesising a decline of 40% to 50% in that part, Woods said.
Oliver Wyman estimated that as many as 35,000 jobs could be at risk in its “lowest-access scenario,” with as many as 40,000 potential additional losses from “the knock-on impact” on the financial industry.
Woods, accompanied in the House of Lords hearing by Bank of England deputy governor Jon Cunliffe, said he expected firms to start putting contingency plans into operation in the first quarter of 2018.
Financial firms would need time to adjust to whatever arrangement the government and the EU reached, Cunliffe said. He expected them to have to review their business models once the withdrawal was complete. /
ABOUT 10,000 UK-BASED FINANCIAL SECTOR JOBS ARE PROBABLY AT RISK ON ‘DAY ONE’ OF BREXIT