To cope with a “hard” exit by Britain from the European Union, Global banks have begun signaling how they will put plans into action.
Depending on whether the outcome of Brexit was “hard” or “soft”, banks have considered varying degrees of upheaval to their British-based businesses until now.
But bankers have already begun giving more details on how they will adapt after Prime Minister Theresa May said that Britain would leave the single market.
Banking industry sources said that outlines of where they want to relocate operations to and how much it will cost would be presented to the boards by bank executives in the coming months.
Since banks would require to install the necessary infrastructure for new or bolstered EU outposts so they can continue to sell products and service EU customers and they being more focused on getting regulatory approval, the movement of jobs from London is likely to be slow at first.
They could move around 1,000 jobs out of London, HSBC and UBS have both warned.
“All the banks are doing the non-harmful stuff first in an attempt to get ahead of the curve,” a senior executive at one of Europe’s largest banks said.
According to lawyers, areas such as license applications, and building technology platforms would be the focus areas.
While most banks will move the bulk of staff further down the line, some jobs could move or be created to help with this.
“Most banks will make decisions on where to shift business by the end Q1, with initial headcounts of ‘100 to a few 100’ to be moved,” said one of the sources familiar with bank relocation plans, speaking on condition of anonymity.
Preparing to move from Britain before the completion of any divorce from the EU, they were willing to spend about $100 million, a senior executive at a European bank said.
However the price tag would rise as banks build up the capital buffers of their EU divisions, rent out real estate and move or hire staff.
Analysts at JP Morgan have estimated, if they need to move capital markets operations out of London as a result of Brexit, eight major US and European banks face a combined $7.5 billion bill in the next five years.
The type of entities and licenses they currently have in Britain and the rest of the EU would decide the scale of the changes banks need to make.
“I think the quivering over the button is dependent on business model and what you use the UK for,” Douglas Flint, chairman of HSBC, Europe’s biggest bank, told British members of parliament last week.
“If you are a foreign institution hubbing into Europe from London, you really have no choice other than to think very quickly and carefully how to replicate the access to Europe … If you have already established operations in Europe, you can take your time”.
The five largest U.S. banks will need to establish brand new entities in the EU right away and apply for many new licenses.
Currently they rely on the EU “passporting” regime that allows them to offer services across the bloc out of their British hubs and employ around 40,000 people in London, more than in the rest of Europe combined.
(Adapted from Reuters)