04 December 2016

Financial Times: Financial sector struggles to find common vision for Brexit

[...] the industry is struggling to present a compelling vision for Brexit, with one senior executive lamenting that financial services are nowhere near the top of the government’s list of priorities, despite their importance to the economy.

Partly, the City is struggling because it relies on multiple overlapping organisations to voice its interests, with individual companies, sectoral trade bodies and umbrella groups such as TheCityUK all presenting ideas. Partly it is because the financial sector has run a disjointed and ill-designed campaign so far.

“One of the big issues is that the banks and other City firms simply have genuinely different interests,” said Anthony Belchambers, who heads the advisory council of the Financial Services Negotiation Forum, one of the many bodies that has sprung up to offer advice about Brexit.

Those with cross-border businesses, such as the big investment banks, may care primarily about retaining access to the single market. But those with domestic operations, such as the building societies, are keener on slimming down the “one size fits all EU single rule book”.

So far, institutions with the deepest pockets — especially the international investment banks — have dominated the discourse. The City’s early approach has been to call for the closest possible relationship with the EU single market, preferably by keeping the so-called passporting system that allows companies to operate across the bloc from a single regulated entity in London.

This has been accompanied by predictions that banks will shift people and operations if their warnings are not heeded. Last month, the head of the BBA, Anthony Browne, memorably suggested that some investment banks’ hands were already “quivering over the relocate button”.

But observers worry that this hardline approach may be misjudged and based on unrealistic expectations.

“A number of institutions have appeared to say that a version of passporting is required at any cost to prevent them moving certain activities,” said Barney Reynolds, a lawyer at Shearman & Sterling. “The obvious concern is that this all but guarantees the UK won’t get such an outcome, even if it is best all around. The EU could take such statements as music to their ears. There’s little upside in negotiation if not engaging means business will move.”

The banks themselves are coming to the realisation that simply demanding a “no change” deal may not be fruitful.

“It is no good the industry simply banging on about what it won’t put up with; it needs to start coming up with solutions that are workable,” said Angela Knight, former chief executive of the BBA and non-executive director of the UK interdealer broker Tullett Prebon. “Just shouting isn’t ultimately very helpful.”

One recent change has been more emphasis on the importance of a multiyear transition period to cushion Brexit. “Given the uncertainties about where we might end up, there’s more focus on the transition and protecting the infrastructure that our customers across Europe rely on from any sudden shock,” said the UK head of a US investment bank. [...]

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