According to the Wall Street Journal, four main models are under consideration as they seek to continue serving European clients with as little disruption as possible to their UK operations.
The “dream” is the so-called introductory model, under which bank sales teams in the EU “ introduce” clients to the UK entity. But EU local regulators are unlikely to share enthusiasm for this model because it doesn’t give them much oversight of the banks.
A European branch model could see the re-activation of licenses with different European countries. Fully capitalised subsidiaries wouldn’t be required, with banks then able to “branch” into specific countries.
In a back-to-back model, an EU entity would host a compliance team and a few traders. Deals would move across to a bigger entity in the UK or New York after being booked in the EU. With little risk in the EU entity, could this be the capital-efficient approach to meet investment bank needs?
Or if all else fails there’s the full blown bank model, requiring significant capital, trading infrastructure, compliance and top management. The creation of “mini-me” versions of their investment banks could be a costly approach for lenders already under pressure to cut costs.
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© Financial News
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