Brexit hit to British banks still not fully felt: UK finance ministry
The impact of Brexit on British banks has not been felt yet, the UK’s finance ministry said Wednesday hours after the European Parliament announced it had ratified the EU trade deal with the United Kingdom.
The hit to London from Brexit has been less severe than initially predicted, however, might have further to play out, said Katharine Braddick, head of financial services at Britain's finance ministry.
The UK was under "no illusions" that a post-Brexit "steady state" has been reached regarding banks settling on locations for their European operations, Braddick told an event held by the Peterson Institute for International Economics. However, "there is still a lot in play," she added.
Banks in London have come under immense pressure from the European Central Bank to relocate staff and activities to the EU.
"There is quite a lot of pressure to move quite a lot quite quickly. That is very much at the sharp end of where we are seeing the new border arise," she said.
Euro share and swaps trading has been relocated from London to Amsterdam, and Brussels wants clearing to follow.
"Clients decide where businesses locate, and that's certainly been the case so far on clearing and we will see that in investment banking," Braddick said.
Bankers have also told Reuters the finance ministry should set out a clear, long-term plan for the City of London and hasten proposed reforms.
The finance ministry, she said, is aware that it needs to re-establish a "sense of clear and consistent values and direction" in financial services policy and regulation.
She went on to say that the Brexit experience is viewed by industry as threatening predictability in business decision-making.
Meanwhile, Douglas Rediker, founder of consultancy International Capital Strategies, said the hit from Brexit could speed up after the COVID-19 crisis.
"We saw the vast majority of EU equity trading move from London to Amsterdam. It did poke a big hole in the story that London could never be replaced," Rediker said.
This comes after the 705-member Brussels chamber overwhelmingly backed the bare bones trade deal sealed last Christmas Eve following nine months of bad tempered negotiation.
EU lawmakers supported the trade and cooperation agreement by 660 votes to five, with 32 abstentions, the parliament announced on Wednesday.
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