Banks poised to relocate out of UK over Brexit

AFF8879

There will not be any short term exodus of banks. Firstly, the cost of relocating a single employee is incredibly expensive (over £10k for a mid level investment banker....going to be eye watering for the senior directors).

Secondly, do you really think the tens of thousands of staff working in London will gladly uproot their lives and families at the drop of a hat and take them abroad? Banks can't just replace thousands of skilled employees and continue to serve clients with no disruption. Banks know this which is why most news articles are reporting that the big players are requesting (/demanding) transitional arrangements to be put in place.

Banks can largely get around the lack of passporting through altering their legal entity structures and relocating a few key functions / employees. Not that this is at all ideal / cheap either.

That said, it certainly doesn't mean there won't be a long term shift to a more continental spread of banks. Not that this is necessarily a bad thing for the industry- I think Brexit has brought home that there was a huge concentration of political risk by having so much in London.

NYC and Hong Kong will be far better beneficiaries of Brexit than Frankfurt, Madrid etc. They already have an infrastructure which is comparable to London, whereas nowhere in Europe comes close (yet).

zagubov

Thrugelmir wrote: »

RBS is restructuring to comply with the new regulations. As a consequence retail (Natwest) and markets (Investment banking) will be entirely English based. All that's left in Scotland is the old regional RBS business. In essence not a lot.

Can't wait to see it. RBS swallowing NatWest looked like the recipe for the worst case of indigestion I've ever seen.

As regards financial services moving away. The expense would be onerous. A workaround would be found.

A_Medium_Size_Jock

An informative piece in Reuters this morning, including:

"The feedback from Wall Street was that any move to Paris would happen 'over their (global banks') dead bodies'," said the source with knowledge of the government's approach, speaking on condition of anonymity. "And Frankfurt simply isn't big enough to handle it (being a global financial hub)."

http://uk.reuters.com/article/us-britain-eu-city-idUKKCN12O0GX

Conrad

Global Banks are posturing in order to try and extract a tax advantage out of the UK.


In any event, aside from re-locating a few staff, there will be no wholesale re-locations because;


1) The EU is much more intrusive and with us leaving, regulations will only get more intense
2) The EU is looking to investigate sweet Irish tax deals
3) Taxation in Germany and France on Banks and their bonus loving employees is higher
4) Potential future referendums could occur anywhere in Europe

Thrugelmir

AFF8879 wrote: »

I think Brexit has brought home that there was a huge concentration of political risk by having so much in London.

The UK has become home to financial services in the West because of the stability and regulatory framework, also the language. Not changing anytime soon.

zagubov

Thrugelmir wrote: »

The UK has become home to financial services in the West because of the stability and regulatory framework, also the language. Not changing anytime soon.

Isn't there also an advantage to being on our time zone as well? Easy to get to as well. A massive proportion of intercontinental flights start or end here IIRC.

Conrad

zagubov wrote: »

Isn't there also an advantage to being on our time zone as well? Easy to get to as well. A massive proportion of intercontinental flights start or end here IIRC.

The biggest factor of all is local synergy. A load of people all seeking trading advantages, gain these advantage by way of harvesting information, a drunken disclosure, an over-heard snippet - that is to say information garnered through years of personal networking of the vast London finance ecosystem - which every now and then lets you get all your info ducks in a row and make a killing.


This is then all backed-up by having masses of related expertise all in one place, the lawyers, the export consultants, the insurers, the accountants.


You just cannot up-sticks and carry on as you were in Frankfurt.

Thrugelmir

zagubov wrote: »

Isn't there also an advantage to being on our time zone as well?

It is.

At 9am GMT in London, it is 5pm in Singapore and Hong Kong and 6pm in Tokyo.

At 5pm in London, it is midday in New York and 9am in San Francisco.

Major financial centres are all north of the equator.

AndyBSG

Conrad wrote: »

The biggest factor of all is local synergy. A load of people all seeking trading advantages, gain these advantage by way of harvesting information, a drunken disclosure, an over-heard snippet - that is to say information garnered through years of personal networking of the vast London finance ecosystem - which every now and then lets you get all your info ducks in a row and make a killing.

Uhhm, what you're describing there is Insider Dealing which is illegal.

Anyone working in financial services is not allowed to use information that is not publicly available to gain an advantage.

Yes, it's hard to get a conviction but you can be pretty sure anyone suspected of doing it will soon find themselves unemployed.

I happened to buy some shares in a company while I was at Credit Suisse and didn't realise our company was advising them on a merger which went public the day after I bought them.

Needless to say the next few weeks had me involved in some interesting discussions with our Compliance department to prove it was a complete coincidence!

steampowered

The reason the banks want to move is passporting.

If you are a bank headquartered within the EU, you can place yourself in any EU company, be regulated there and do business in other EU countries. For example the Italian regulator could not start imposing undue restrictions on your ability to do business in Italy because that is contrary to the UK's free movement of goods and services rules.

If you are a bank headquartered outside the EU, you are totally at the mercy of local regulators. For example if you are a UK bank and the Italian regulator decides to impose a bunch of arbitrary regulations on you to make life difficult compared to local banks, it can do so. This stuff doesn't get covered in trade deals.

It makes perfect sense that some banks will move their headquarters into the EU. Otherwise you are completely at the mercy of the local regulatory in each EU country in which you do business. Of course they will still maintain large offices in London, but they might not be quite as large as before.