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Lenders including HSBC, JPMorgan and Morgan Stanley had warned before Thursday’s vote of thousands of job cuts because they would no longer be able to use London as a jumping off point for selling into the EU.
Now the timeline for making those cuts, and decisions about whether to relocate trading, banking and advisory businesses, has become confused because David Cameron, prime minister, has resigned and suggested a formal start to the departure process will not start until at least October.
Until the UK hammers out the terms of its exit and future trade relationship with the EU, internationally active banks will not know how much they have to change.
A senior executive at a US bank said his team would be pushing regulators for advice on “what are we all supposed to be doing now with so much uncertainty”.
The timetable for setting up EU operations would require “Herculean” efforts after the clock starts ticking on the UK’s two years of transition, he said.
“A lot of preparation has been done, a lot more preparation needs to be done on both sides now,” he added. “We have to know what all of us need to do to effectively guarantee a smooth transition.”
Several bankers said they had had extensive conversations with other EU regulators about alternative locations. Some have also spoken to staff about relocations.
The biggest licensing unknown is whether UK-based banks will lose their right to “passports” that let them do business across the other 27 EU countries.
Banks are also keen to know who the new political leadership will be so that they can gauge how much the UK will push to protect their interests.
“We want to know who is going to be in which position, what their policy towards the negotiations is going to be … where we sit in the pecking order between fisheries, automotives and banks,” said a senior executive at another US bank.
If the UK losses EU market access, banks will have to find an alternative home base in the bloc.
The second banker said there were three ways a bank could go about getting a new EU passport. The first is to use an existing licence in an EU country and “build it up” into a more substantial office. All the big overseas banks have at least some licences in other EU countries, but most of them would need to expand their licences if they wanted to use them for passporting.
The second option would be to buy a licensed legal entity, which the banker said was “very very expensive”, and the third would be to start from scratch with a new licence application in a country where the bank does not already do business.
The second US banker said that banks were hoping that they could delay their decisions until there was more political and regulatory clarity. “No one is willing to spend billions unless they have to,” he said, adding that banks were keen to liaise with the UK authorities on the terms of the country’s EU exit.
Full article on Financial Times (subscription required)