Giant U.S. banks still have to deliver a Brexit plan to get staff across the English Channel before a potential second wave of Covid-19 forces Europe’s doors shut again.
JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs Group Inc. have lost precious months during the pandemic lockdowns in moving employees to European Union financial hubs. With Brexit talks deadlocked and time running out before the year-end deadline, firms are finally reactivating long-held plans to shift staff from London -- only to find they can’t move fast enough.
“Relocating staff during a second spike is a concern,” said Peter Bevan, a partner at the law firm Linklaters. “During lockdowns, a small number of people have been caught in the wrong place and regulators understand that, but if you are talking about an entire team stuck in the location regulators want them to move from, that will make for a tougher conversation.”
Foreign banks oversee almost half of all banking assets in the U.K., according to 2015 figures from the Prudential Regulation Authority. Yet the exodus from London to the continent has been far smaller than some expected after the Brexit vote, with firms moving about 1,000 people by last September, compared with a prediction of 7,000 moves by consultancy EY.
Representatives for JPMorgan, Morgan Stanley and Goldman declined to comment.
German financial regulator BaFin told Bloomberg that little had changed since February, when Chairman Felix Hufeld said banks had done far more than 80% of the work needed to deal with Brexit from a legal and technical standpoint. But when it comes to moving client business to their EU hubs, the banks are, on average, less than a third of the way there, he said.
John Liver, a partner in U.K. financial services at EY, said that banks reached “peak preparation” last year and have since hit the pause button on relocations.
“As it has now been formally clarified that there will not be an extension to the transition period, firms will be considering what final adjustments they need to make,” he said. “Given the extra time that has elapsed, European regulators are likely to be less accommodative of requests for further implementation time to complete EU entity build-up after December 2020.”
European Hubs
Some European banks have advantages over their American peers when it comes to Brexit planning. UBS Group AG decided to merge its U.K. entity with its EU entity that has passporting rights last year, giving the bank flexibility to move staff around the region. Now, its traders, risk and back office teams sit in Frankfurt, where UBS already had a large presence in wealth management.
Credit Suisse Group AG joined UBS in planning for a hard Brexit from the beginning. It moved some staff to bolster the bank’s services in Spain, Germany and Luxembourg. “London will remain a key part of the bank’s strategy and footprint after the U.K.’s exit from the EU,” a spokesman said.