Moving transactions to rival hubs could affect much of their investment banking work
Some of the biggest US financial groups including Morgan Stanley, Bank of America and Citigroup, are examining whether to move transactions totalling hundreds of billions of dollars out of London to rival hubs because of Brexit, calling into question the City’s role as one of the world’s leading centres for investment banking.
The largest investment banks book much of the business they do around the world in London, not only from European clients, but also from those in Asia, Africa, the Americas and the Middle East. Twice as many US dollars are traded in London as in New York and the UK accounts for almost 40 per cent of the world’s $3tn-a-day interest rate derivatives market, although it was recently overtaken by the US.
Moving thousands of jobs out of the UK
While bank bosses have made many headline-grabbing statements about moving thousands of jobs out of the UK because of Brexit, the possibility that they will drain some of their big pools of money out of London has drawn less attention. But reducing the funds they hold in the UK could have consequences for almost every aspect of their presence in the country — including staffing.
“From a supervisory perspective what matters is aligning the risk taking, the management and the money (both in the form of capital and revenues),” says Stephen Adams, senior director at the consultancy Global Counsel. Senior executives at some banks say they were considering how to handle their “rest of world” business if they had to shift capital and liquidity from the UK to the EU.
“Hard Brexit”
They fear that if a “hard Brexit” severs financial services access between the two markets, London would become less effective as a global booking centre. As a result they are in early-stage discussions on whether to shift some of the business to New York, Hong Kong, Singapore or Frankfurt.
Source: Martin Arnold and Laura Noonan in London
