Bank of America Official Likens Brexit to Nuclear Waste Moveby and
Wilmot-Sitwell expects two- to three-year transition period
Process of moving activities from London "fraught with risk"
Bank of America Corp.’s president for Europe, Alex Wilmot-Sitwell, said moving employees and derivatives trading activities from London after Brexit would be “fraught with risk” and require a long transition period after the end of the two-year renegotiation.
"The materials that are being moved are risky materials," Wilmot-Sitwell told U.K. lawmakers at a parliamentary hearing Wednesday. "You don’t move nuclear waste in a race. You do it in a very carefully coordinated and managed process. The materials are perfectly safe, so long as they are properly handled and so long as the period of time to move them is suitable."
Banks face the possibility of having to move derivatives trading and clearing businesses that involve billions of dollars worth of contracts. A “huge amount” of regulatory approvals would be needed to shift that work to the Continent, along with significant coordination between banks, customers and counterparties, Wilmot-Sitwell said.
Bank executives are pressing Prime Minister Theresa May to strike an interim agreement with the European Union to preserve passporting -- the ability of banks to freely sell services and products across the EU -- beyond the end of official negotiations. Failure to win special status could prompt international investment banks to start shifting staff and operations from the U.K. within weeks of May invoking Article 50 of the EU’s Lisbon Treaty to begin the exit process.
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Wilmot-Sitwell was giving evidence to the House of Lords EU Financial Affairs Sub-Committee, alongside HSBC Holdings Plc Chairman Douglas Flint and Allianz Global Investors Vice-Chairman Elizabeth Corley.
Flint said Britain’s exit from the 28-nation bloc risked undermining regulatory changes brought in after the financial crisis to make banks safer. Relocating complicated trading operations to cities across Europe and rejigging legal entities could make it harder for regulators to assess risks, he said.
That’s “counter-intuitive to everything that people have tried to do in the last eight years, post-crisis,” said Flint, who had previously warned that excessive regulation was making bankers too risk-averse for the good of their clients and their own banks. “The whole ecosystem -- in terms of our customers, regulators and policy makers -- has been: how can we bring as much as possible together in a place that is transparent and well-regulated, so that we can eliminate risk?”
Wilmot-Sitwell said increased complexity "adds to risk,” which was unfortunate after regulators had spent years "creating an environment which is much more safe.” The extra costs caused by Brexit would likely be “passed on to clients to a certain extent,” he added.