EU threatens City banks: Move more staff abroad

THE EU is heading for a clash with some of the most powerful banks operating in London, which it says have not moved enough senior staff to the Continent after Brexit.

Legal sources have warned that the European Central Bank is threatening to remove their EU banking licences – which they need to operate – if they don’t move more staff and resources to the bloc.

A source close to the ECB insisted such a measure was a ‘last resort’ and would only kick in if banks refused to co-operate. Britain and the EU agreed to establish a ‘memorandum of understanding’ by the end of March on financial services as part of the post-Brexit deal for the City. However, the memorandum has yet to be signed.

Global banks based in London, such as JP Morgan, Goldman Sachs, Bank of America and Morgan Stanley, set up subsidiaries in the EU after Brexit to continue serving their European clients.

The ECB required companies to shift assets and employees to the bloc to make sure these EU subsidiaries are profitable.

But sources said many top bankers are refusing to leave London, widely seen a top global financial centre alongside New York. They said Covid had also scuppered plans for those who were preparing to move some of their working week to Paris or Frankfurt.

A senior lawyer told The Mail on Sunday: ‘The ECB’s current position is “we absolutely require you to perform your commitments to grow [EU operations]. If you don’t we’ll withdraw your licence”. What the ECB has absolutely not seen and what it is getting increasingly cross about is the movement of senior staff.’

Barney Reynolds, partner at law firm Shearman & Sterling, said: ‘The ECB is definitely pushing for more senior bankers to move to the EU. The banks are being pushed. The EU is constantly trying to pull more bits over. There’s no legitimate basis for doing it.’

In a recent speech, Edouard Fernandez-Bollo, a member of the ECB, said: ‘Empty shell institutions are not acceptable in the euro area.’ He added banks must allocate sufficient capital and enough ‘high-quality resources for risk management’. A new report to be released tomorrow by consulting firm EY is expected to show that fewer than 8,000 people have been moved from financial services in London to the EU.

It is also likely to say financial services firms have barely shifted any more employees and assets to the EU this year because of Covid.

Consulting firm Oliver Wyman forecast in 2017 that a ‘hard’ Brexit would drive up to 35,000 jobs out of the UK across financial services.