Clock ticking

Banks Warned Over Brexit Move

  • Why it matters

    Why it matters

    Britain’s decision to leave the EU by March 2019 could spell chaos for Europe’s banking sector, if financial institutions fail to reorganize their businesses in time.

  • Facts

    Facts

    • Brexit could bring as many as 10,000 new jobs to Frankfurt over the next four years, according to some estimates. Other cities in the 27 countries that remain in the EU also stand to benefit.
    • US investment banks Morgan Stanley and Goldman Sachs, whose European operations are centered in London, have reportedly rented new office space in Frankfurt.
    • Some members of the European Parliament support rules that would require banks to relocate their derivatives businesses, the majority of which go through London clearinghouses, to the EU.
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    Audio

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General Views Of The European Medicines Agency And European Banking Authority  Offices Ahead Of Brexit Relocation Announcement
Don't let the door hit you on the way out. Source: Bloomberg

You may delay, but time will not. Although more than a year has passed since Britain voted to depart the European Union, banks that are tempted to leave London for the Continent have been curiously reluctant to make concrete plans. And their hesitation, critics say, isn’t good for business.

“The banks have to finally get their act together, otherwise they won’t make it before Brexit happens at the end of March 2019,” a high-ranking regulator, who wished to remain anonymous, told Handelsblatt. “The decisions must be made now.” Financial institutions need to allow enough time to hire employees and get their IT systems running smoothly, the source said.

A member of the European Central Bank’s executive board, Sabine Lautenschläger, made similar comments last week. “I have a very clear message for banks both small and large: The clock is ticking,” she said. These institutions “still haven’t made as much progress as we’d like,” Ms. Lautenschläger added.

With the outcome of the UK’s negotiations with the EU still unclear, Ms. Lautenschläger advised banks to prepare for a hard Brexit – meaning no trade agreement, no special exceptions and no transitional rules for British firms and organizations. To continue to do business in the European Union, from 2019 the UK’s financial institutions will need to hold a banking license in at least one of the trading bloc’s other 27 countries.

While some banks have inched their plans forward, it’s time for the big bosses to shed their reluctance and take decisive action, the ECB board member added. “We haven’t seen a lot of final decisions there on how these and other banks are looking to organize their businesses,” Ms. Lautenschläger said.

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