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Bank bosses call for more time to adapt to life after Brexit
[LONDON] Top City of London executives said banks will need more than two years to adapt to Britain's departure from the European Union if the market is to avoid disruption, while the EU's top official called for a prompt start to divorce talks.
Once Britain begins formal negotiations for exiting the EU, known as Article 50, it will have two years until it ceases to be a member of the bloc.
On Wednesday, three of the most senior executives in the City told lawmakers this was not long enough for banks to adapt and they would need more time before a trade deal is put in place.
"It's a multi-year process if it's going to be completed safely and not going to risk financial stability," Alex Wilmot-Sitwell, president of Bank of America Merrill Lynch in Europe told a House of Lords committee. "I suspect it's two to three years."
HSBC Group Chairman Douglas Flint and Allianz Global Investors Vice Chair Elizabeth Corley also warned of the dangers posed by hasty change.
Seeking leeway from Brussels could be difficult, not least because there is disagreement in the British government about what concessions to make in negotiations.
The talks cannot start until Prime Minister Theresa May formally sets the two-year countdown to British departure.
In Strasbourg, Jean-Claude Juncker, who heads the EU's executive European Commission, urged that to be done quickly and repeated the EU negotiating position that Britain could not retain its full EU market access if it blocks free immigration from the EU.
"There can be no a la carte access to the single market," the Commission president told the European Parliament in his annual State of the Union address. "Only those can have unlimited access to the internal market who accept that there will be free access for persons and goods."
Banks in Britain depend on an EU "passport" to serve clients across the 28-country bloc from one base and lenders worry that these passporting rights will end after Britain leaves the EU.
The European Commission has named a senior German trade negotiator to join France's former EU finance commissioner, Michel Barnier, at the head of the team negotiating Britain's departure from the European Union.
In parliament on Wednesday, May said that the government is working for "the right deal" on trade relations with the EU, without giving further details.
Banks are making contingency plans to move some of their operations to continental Europe if Britain does not negotiate access to the bloc's single market after Brexit.
Mr Wilmot-Sitwell said the financial sector is not a "Lego set", where you can pull up and move pieces without affecting clients and financial stability. "You don't move nuclear waste in a race," he added.
HSBC's Mr Flint, who is on a panel advising the government on post-Brexit trading terms, said it would take several years for a bank in London to complete the "enormous task" of setting up a new subsidiary in the EU.
Tinkering with London's financial "eco-system" could undermine new rules regulators have put in place since the 2007-09 financial crisis, Flint said. It could also impact customers across Europe, he said.
London accounts for 69 per cent, or US$928 billion, of the off-exchange euro-denominated interest rate derivatives market and President Francois Hollande of France has said clearing in euro-denominated contracts should be moved to the eurozone.
That would bump up costs by forcing banks and users to have multiple piles of cash to back trades, Mr Flint said.