Banks and Brexit: what the experts think
Bang go the City’s hopes of retaining cross-border “financial passports” when Britain leaves the EU, said Helen Cahill in City AM. These were dashed this week by the EU’S chief negotiator, Michel Barnier. “On financial services, UK voices suggest that Brexit does not mean Brexit,” he observed, in a veiled reference to some soothing words delivered days before by the Brexit Secretary, David Davis. He has proposed devising a special visa system for the City, but Barnier was having none of it. “Brexit means Brexit, everywhere,” he continued. “The legal consequence is that UK financial service providers lose their EU passport.” In other words, Britain will have no preferential access for financial services, just patchy “equivalence” arrangements available to countries like the US and Singapore.
Phantom cliff edge?
No one doubts what’s at stake, said Jonathan Ford in the FT: “Brexit has put in play the future of one of Britain’s biggest national assets,” one that pulls in about £70bn a year in taxes. But does the feared legal “cliff edge” really exist, “or is it a phantom that resides mainly in bankers’ minds”? There’s a tendency to see passporting as “the only legally sound way” to do cross-border EU business, but it’s a relatively recent invention. Before that, people raising money simply came to London – it’s what secured the City’s “pre-eminent status” – and there’s no reason that shouldn’t work again. Existing products, loans and contracts, meanwhile, are protected by international safeguards. “Bankers complain these are less legally gold-plated than the existing passporting regime. But they still provide a clear way to trade.”
Notional HQS
Goldman Sachs’ boss, Lloyd Blankfein, has been tweeting suggestively about the charms of Paris and Frankfurt, said Sarah Baxter in The Sunday Times. But we should relax. Although US investment banks are quietly setting up “notional HQS” in EU cities to “satisfy requirements”, most of their staff will remain in “subsidiary” offices in London, where they “persist in wanting to live and work”. London will remain the financial centre of Europe for the foreseeable future because, as former New York mayor Michael Bloomberg notes, London has everything that the industry needs. “I fear no City Brexodus – I’ve been to Frankfurt.”