On June 24, 2016, the British people voted for the UK to withdraw from the European Union. This decision implies major changes on the banking side. Among their main fears is the loss of the "passport" allowing financial products and services to be sold within the EU from the UK after approval by a national regulator.
Losing your European passport
The loss of the European passport represents the main concern for financial players following the final adoption of the divorce agreement between the UK and the EU. As a reminder, this passport is required for financing operations, taking deposits, providing investment and payment services.
British financial companies wishing to continue operating within the EU have limited options. Some have anticipated this by setting up offices in EU countries. Major groups such as Barclays and Bank of America have chosen to expand their headquarters in Dublin, Luxembourg or Amsterdam. In France, the Association des marchés financiers (AMAFI) has granted over 40 authorizations to portfolio management companies and investment firms wishing to set up in Paris. At the beginning of the year, Paris Europlace forecast that nearly 5,000 direct jobs would be relocated to France in the financial sector. It has to be said that the capital has considerable assets to attract a maximum number of high value-added jobs. Indeed, it is one of the few European financial centers to boast a complete ecosystem, with major financial players, French and international clients, and recognized centers of expertise in asset management, banking, private equity and fintech.
Expensive team transfers
Many British, American and Asian banks have a limited presence outside the UK. To meet the expectations of local customers, they will inevitably have to open subsidiaries or branches. In existing structures, staff numbers will be significantly increased. This reorganization will entail additional costs (premises, information systems, etc.). Another challenge for financial establishments will be to convince certain employees to move to financial centers that may be considered too provincial.
Finally, banks will have to address other major issues directly linked to the UK's exit from the EU including: the establishment of clearing houses and cross-border payment systems between Europe and the UK, contracts governing financing agreements with customers and business partners, supply chains operating on the single market principle.
The EU and the UK have until December 31 to establish the framework for their future relationship. During the transition period, the UK will remain part of the single market. London may therefore seek to relax its banking rules.