- TheCityUK pressing for unfettered access to the single market
- John McFarlane says U.S. has ‘a lot at stake’ in talks
The world’s biggest banks are appealing to the U.S. and other foreign governments to help them make the case for safeguarding London’s status as an international financial hub in the Brexit negotiations.
Fearful their industry will be hurt when the U.K. leaves the European Union, executives are reaching out to governments abroad to ask them to lobby EU policy makers on the importance of London maintaining unfettered access to the bloc, Barclays Plc Chairman John McFarlane said in an interview Thursday.
“The City of London is a global financial center, not just Europe’s, so at the end of the day we also need to look at the implications for the U.K. as a whole and for the City of London and for the rest of the world," said McFarlane, who chairs industry lobby group TheCityUK and also sits on a government panel for promoting the financial sector. “International advocacy would be the term we would use. It’s important.”
Banks are pressing Prime Minister Theresa May’s government to strike an interim agreement with the EU that would preserve their ability to provide services on broadly similar terms to now beyond the end of the official two-year negotiation period. They are concerned May has placed controlling immigration higher on her priority list than ensuring continued commercial ties to the world’s biggest market.
“What we’re trying to make clear is what the issues are, and that change will not come without consequences," said Robert Rooney, the chief executive officer of Morgan Stanley’s international business, who joins McFarlane on the European Financial Services Chairmen’s Advisory Committee. "We’re trying to make sure people understand what those consequences are.”
U.S. financial industry lobby groups wrote to the nation’s Treasury Secretary Jacob J. Lew this week, urging the department to work with policy makers in the U.K. and EU to help avoid disruption in global markets.
A “transition period” is needed to allow firms time to adapt to any institutional or legal changes, the Securities Industry and Financial Markets Association, the American Bankers Association, Financial Services Forum and Financial Services Roundtable wrote. “It is vital for the prosperity of the U.S. and world economies that uncertainty is kept to a minimum and that existing trading relationships are disrupted as little as possible.”
Diluting London’s financial power would be a particularly acute problem for Wall Street banks given the significant revenue they generate from EU clients. Eighty-seven percent of U.S. investment banks’ EU staff are located in the U.K., which is also home to 78 percent of the region’s capital markets activity, according to think tank New Financial.
Having once said he would relocate as many as 4,000 employees to the continent if the U.K. voted to quit the EU, JPMorgan Chase & Co. CEO Jamie Dimon said this week he remains “significantly concerned” by the decision to do so.
“This is very important for the U.S. as they have a lot at stake here,” McFarlane said.
Other governments are already lobbying. The Japanese government this month released a memo which urged “maintenance of an environment in which services and financial transactions across Europe can be provided and carried out smoothly.” It also expressed hope that the borders wouldn’t be closed to banking talent.
Having already met with Chancellor of the Exchequer Philip Hammond, McFarlane and other members of the panel of industry bosses, including Royal Bank of Scotland Group Plc Chairman Howard Davies, are scheduled to soon meet Brexit Secretary David Davis.
“The meetings are more scoping, introductory at this stage to say these are the issues that are arising, McFarlane said. “They’ll evolve into more tangible conversations about individual implications, but that’s down the road.”
Failure to secure a special status or greater clarity over the government’s plans could prompt some banks to start shifting staff and operations from the U.K. within weeks of May invoking Article 50 of the EU’s Lisbon Treaty, which begins the exit process. She has ruled out starting those talks before next year.
“If the end result is a lack of access, then both the U.K. and Europe will lose, because the efficiency of London as a global capital market will be very difficult for Europe to replace,” said Rooney. The EU “is arguably the largest market economy in the world, and if it wants to remain so, then it really does need a large, efficient global financial center to deliver capital and credit to its companies,” he said.
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Mark Boleat, chairman of the policy and resources committee of the City of London Corporation, is also planning to promote the U.K.’s international importance in a forthcoming trip to New York.
“We need to assure foreign governments and businesses that U.K. Plc is still very much a trading nation and that we are a fantastic gateway to Europe for the rest of the world and a huge market in our own right,” he said.