EU ramps up Brexit crackdown on City of London in latest banking power grab
Dominic Raab dismisses EU threat to City of London
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Officials at the European Central Bank have ramped up their so-called “desk-mapping” scheme to ensure investment banks have moved sufficient staff and asset to the bloc. In the almost five years following the referendum on our EU membership, eurocrats have forced banks to move thousands of jobs and hundreds of billions of pounds in assets from the City to the Continent. While this hasn’t damaged London as an international finance hub, the EU hopes to force through a power shift in the coming years.
The ECB wants to stop the practice of “back-to-back booking” where banks serve clients in Europe while holding capital and management in the UK.
Its officials argue that after Brexit this makes it harder for them to police the risk of the financial services market.
The review is looking into the EU units of international banks, including Goldman Sachs, Citigroup, JP Morgan, Chase & Co, Bank of America, Barclays and Morgan Stanley.
ECB chiefs have asked the banks to answer detailed questions about their risk-management set-ups, including where traders and associated staff are based and how they process trades.
EU regulators insist that banks cannot operate small offices inside the bloc, with top executives and risk-taking staff remaining in London.
UK politicians and regulators have long feared that their European counterparts are attempting to poach as much financial services business as possible under the guise of repatriating oversight of all euro-based trade.
In the past, banks used London as a hub to “passport” their financial services into the Continent.
But Brexit means the UK has lost its unrestricted access and many lenders have been forced to set up or bolster their operations inside the EU.
The ECB’s review is still ongoing making it hard to judge what banks will be hit hardest by relocation demands.
A spokeswoman for the EU regulator said: “The desk-mapping exercise is at an early stage and still ongoing.
“Thus the ECB has not given any feedback to individual banks on its outcome.”
Banks have so far been reluctant to push through the wholesale changes demanded by the EU amid hope that a new financial services pact can be reached between Brussels and the UK.
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Coronavirus has also thrown up a major issue with huge restrictions on movement still in place to curb the spread of the virus.
The ECB initially offered some leniency to banks moving staff to the Continent but it has now said the pandemic is not an excuse to further delay relocation efforts.
As part of the changes, Deutsche Bank is moving 100 jobs out of London and relocating the roles to the EU and Asia.
Germany’s biggest lender is making a quarter of the division’s 400 staff redundant, with their roles moving to Dublin, Berlin, Frankfurt and cities across Asia.
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Some of the London-based staff who are eligible to work in the EU will be allowed to reapply for their jobs but must take a 25 percent pay cut.
It is estimated that banks have moved or plant to move more than £900 billion in assets to the EU, around 10 percent of the entire UK banking system.
HSBC and Citigroup have already shifted a number of jobs to the Continent and JP Morgan has warned it may have to move its European operation out of the UK.
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