Banks shift from London to Europe
Major lenders prepare new hubs to continue serving their customers
10 November, 2017
About 50 banks have so far approached the European Central Bank about relocating business from Britain to the Eurozone as London presses ahead with moves to exit the EU, the ECB said last Tuesday cited by news agencies. “Some have visited us several times to discuss their plans to move,” ECB's banking supervision head Daniele Nouy said, adding that 20 institutions have already applied for a Eurozone banking license. “It's about 20 that have something that is already being assessed. Maybe they have not signed it, but they have made a pretty comprehensive application.”
Under current rules, Britain is under the jurisdiction of the so-called financial passport, a set of rules and regulations that allow UK based financial firms to access customers and carry out activities across Europe. Many non-EU lenders use the passport to operate a hub in the UK and then sell services across the 28-nation bloc.
Once Britain leaves the EU, however, it is almost certain to lose passporting rights, which are tied strongly to membership of the European Single Market, a marketplace the UK intends to leave as part of Brexit. As a result, major lenders, especially those from the US and Japan, are making preparations to set up new hubs in continental Europe so that they can continue serving their customers in Europe without any disruption. Banks need at least a year to set up fully functioning branches and subsidiaries in Europe to maintain activities.
Under EU law, banks wanting to offer services such as deposits and lending are required to have an independent subsidiary based in an EU country. London's financial market has emerged at the forefront of the fallout from Britain's decision to leave the EU, with the bloc representing a major focus of business for many institutions. As a result, many financial houses have been forced to consider abandoning the City of London and shifting their operations, or at least part of them, to cities such as Paris, Frankfurt, or Amsterdam.
Several foreign banks have already decided to shift to Frankfurt, the German financial capital. Four big Japanese banks, MUFG, Nomura, Daiwa, and Sumitomo Mitsui have all announced new EU HQs, with three choosing Frankfurt, and one, MUFG, opting for Amsterdam. American giant Citigroup also confirmed that it will send some staff to Frankfurt.