Carney Urges Caution as Banks Threaten to Relocate on Brexitby , , and
Firms should wait before committing to hard decisions, he says
Says a lengthy transition period is in everyone’s interests
Bank of England Governor Mark Carney urged financial services firms not to make any rash decisions on moving operations out of the U.K. as a European Central Bank official revealed many have already been in touch on the matter.
“They’re making contingency plans, those contingency plans are in various stages of readiness and degree and specificity," Carney told lawmakers at a Parliamentary hearing in London on Tuesday. "It is very early days. So planning makes sense; action, in most cases, in general, is precipitous."
Banks are bracing for the loss of their right to sell services freely around the EU from London and are set to start the process of moving jobs within weeks of the government triggering Brexit, which is scheduled to happen by the end of March next year. British Bankers’ Association head Anthony Browne said last month that banks’ hands are “quivering over the relocate button.”
The ECB’s Single Supervisory Mechanism, which began overseeing the currency bloc’s largest lenders two years ago, is preparing to deal with an influx of requests from banks in the U.K., the vice chair of the central bank’s supervisory board said Tuesday.
“We have already many banks asking for interviews and meetings so that they can identify where are our pressure points and where our methods differ” from U.K. supervisors, Sabine Lautenschlaeger said in Frankfurt. “For sure we are preparing.”
A spokeswoman for the ECB declined to say how many banks have requested meetings or inquired about a banking license.
Carney, a former managing director at Goldman Sachs, said firms should hold off until they have a better sense of the shape of the U.K.’s future trading relationship. He said a long transition period after the end of the two-year Brexit renegotiation is in everyone’s interests.
"That really informs what businesses need to do today or six months from now," the governor said. "Because, you transition, you restructure, during that restructuring window. You don’t need to do it in advance, in anticipation of what agreement the government ends up striking.”
If it looks like the U.K. is heading for a so-called hard Brexit then banks may have to accelerate their contingency planning, Carney said.
"If the time to exit is measured in 18 months or less and the degree of exit is viewed as considerable then a number of those firms would take decisions, that’s the best guidance I can give.”