EU threatens city banks: move more employees abroad or risk losing your license
- European Central Bank threatens to remove EU licenses for British banks
- Such a measure is a “last resort” to use only if banks refuse to cooperate
The European Union is headed for a clash with some of the most powerful banks operating in London, which he says have not moved enough senior staff to the continent after Brexit.
Legal sources have warned that the European Central Bank is threatening to remove its EU banking licenses – which they need to operate – if they do not move more staff and resources into the bloc.
A source close to the European Central Bank insisted that such a measure was a “last resort” and would only start if the banks refused to cooperate.
Warning: European Central Bank threatens to remove EU licenses for British banks
Britain and the European Union have agreed to draw up a “memorandum of understanding” by the end of March on financial services as part of a post-Brexit deal for the city. However, the memorandum has not yet been signed.
London-based global banks such as JP Morgan, Goldman Sachs, Bank of America and Morgan Stanley set up subsidiaries in the European Union after Brexit to continue serving their European customers.
The European Central Bank has asked companies to transfer assets and employees to the bloc to ensure that these EU affiliates are profitable.
But sources said many top bankers are refusing to leave London, which is widely seen as a major global financial center alongside New York. They said Covid also canceled plans for those who were preparing to move part of their weekly work to Paris or Frankfurt.
A senior lawyer told The Mail on Sunday: “The current position of the ECB is ‘we are asking you to fully implement your commitments to growth’. [EU operations]. If you do not withdraw your license. What the ECB has not seen at all and is increasingly skipping is the movement of senior staff.
Barney Reynolds, partner at law firm Shearman & Sterling, said: “The ECB is definitely pushing for more big bankers to move to the EU. Banks are being pressured. The EU is constantly trying to pull off more details. There is no legitimate basis for doing so.
In a recent speech, ECB member Edward Fernandez Polo said: “Empty phantom institutions are not acceptable in the eurozone.”
He added that banks must allocate sufficient capital and sufficient resources to manage risks.
A new report to be released by consultancy EY tomorrow is expected to show that less than 8,000 people have moved from London’s financial services to the European Union.
It is also likely that financial services firms will say they have hardly moved more staff and assets to the EU this year due to Covid.
Consulting firm Oliver Wyman predicted in 2017 that a ‘hard’ Brexit would lead to as many as 35,000 UK jobs leaving the UK via financial services.