London's 'golden age' as Europe's financial capital is over, says NatWest chairman

London

THE City of London's "golden age" as Europe's financial capital is over following Brexit, but it will remain a major and profitable centre, NatWest bank chairman Howard Davies said on Tuesday.

The City has been largely cut off from the European Union (EU) since Britain's full departure on Dec 31, 2020, with bankers and City officials not expecting direct access to the bloc anytime soon.

"Almost five years after the Brexit referendum, and five months after Britain's exit from the European Union, the future of London as a global financial centre seems secure," the NatWest chair said in a column for Project Syndicate on Tuesday.

"But although the City will remain Europe's largest financial marketplace, its golden age as Europe's financial capital is over," said Mr Davies, a former deputy governor of the Bank of England and chairman of the UK Financial Services Authority.

The debate about the future of the City so far has remained a "dialogue of the deaf" as backers of Brexit say the hit would be minimal, while opponents of leaving the EU forecast "gloom and doom", he said.

Covid-19 has confused the picture, making it harder for staff to relocate from London to the EU, he said.

Trading in euro shares and swaps shifted from London to the continent, but it will take time for any putative rival in the EU to develop a plausible matching offer, he added.

Bankers want Britain to focus on making the City more attractive for global investors, and Brussels watches closely to see how far the UK will go in diverging from EU rules.

David Frost, the UK minister in charge of ties with the EU, said on Monday it was important for Britain to use its freedom from the bloc to de-regulate in the most productive way possible.

"We are looking at financial services regulations and seeing what we can do now we are able to move on from EU arrangements in financial services," he told lawmakers. He is setting up a new unit to start a "journey that will bring huge benefits".

NatWest, formerly Royal Bank of Scotland, has slashed back its overseas operations since its balance sheet ballooned to bigger than the size of the UK economy before requiring a government bailout in 2008 during the financial crisis.

But its minnow investment bank NatWest Markets retains a presence in the eurozone in Amsterdam, which the bank bulked up ahead of Brexit. REUTERS