City jobs risk as sales rights face new EU scrutiny

Gambling chiefs win as investment firms lose out

BRITAIN’S financial services industry could face restrictions on selling to European customers as a result of the vote to leave the European Union – casting a shadow over thousands of jobs in the square mile.

The head of France’s central bank warned yesterday that banks would lose so-called ‘passporting’ rights if the UK leaves the single market – meaning banks in London would not be able to offer financial products to customers in Europe.

Many Swiss and American banks have chosen to set up their European sales operations in London because it was regarded as a gateway to the European market.

Francois Villeroy de Galhau, who also sits on the governing council of the European Central Bank, told French radio yesterday that UKbased banks would only be able to keep that access by applying existing EU rules.

‘There is a precedent, it is the Norwegian model of the European Economic Area, that would allow Britain to keep access to the single market but by committing to implement all EU rules. It would be a bit paradoxical to leave the EU and apply all EU rules, but that is the solution if Brit- ain wants to keep access to the single market.’ Experts warned that without passporting financial services, firms would have to get separate authorisations to cater to EU clients.

‘In financial services you don’t have tariffs. What tends to block them is extra requirements for authorisations. As soon as you are outside you can’t automatically sell to European clients, you have to go back to having to do a deal in each country,’ said Sharon Bowles, a former Liberal Democrat MEP and ex-chair of the European Parliament’s Economic and Monetary Affairs Committee.

Economists who supported the Brexit side waved aside concerns about passporting in the lead-up to the vote and reiterated those points this weekend.

‘Given the single market has not performed well in financial services, in retail markets many firms already have representation in many EU countries,’ said Gerard Lyons, who was one of eight Economists for Brexit and Boris Johnson’s economic adviser when he was Mayor of London. Banks are pinning their hopes on new rules allowing them to offer products if they have an ‘equivalent’ regulator. The rules mean that if UK regulation is up to scratch they will be allowed to cater to clients in the EU without having to get separate authorisations across the Continent.

Many investment banks are already set to relocate staff as a result of a likely move by the EU to force them to trade some eurodenominated assets within the EU.

Morgan Stanley denied a report that it was already moving 2,000 staff – but sources close to the bank concede there is a plan to move up to 1,000.

JP Morgan has said Brexit could see it move up to 4,000 roles but it will not quit London, while HSBC has said it could move another 1,000 and Goldman Sachs has said it will shift jobs to Frankfurt.

The chief executive of the London Stock Exchange Xavier Rolet warned in the lead up to the vote that 100,000 jobs could go. Britain’s EU financial services commissioner quit on Saturday, saying: ‘I don’t believe it is right that I should carry on as the British Commissioner as though nothing had happened’.