Hubertus Väth, MD of Frankfurt Main Finance, the group responsible for promoting the German city’s credentials as a financial centre, said it would be one of the main beneficiaries of the UK’s vote to leave the EU.
He pointed out that Frankfurt is already home to the European Central Bank, Deutsche Börse – one of the biggest clearing houses in the EU – and is highly integrated with Luxembourg, an established hub for listed investment funds.
Vath was joined on the panel by Edouard-François de Lencquesaing, chief executive of the European Institute of Financial Regulation and a special adviser to Paris Europlace – the lobby for Paris as a financial centre – Nicolas Mackel, the chief executive of Luxembourg for Finance, and Vishal Vedi, a banking partner at Deloitte. The event was moderated by FN columnist David Wighton.
Kicking off the event in London, de Lencquesaing thanked the British public for the Brexit vote, saying it was a much-needed “wake-up call” for the EU’s 27 remaining member states that helped them realise how important the financial system was.
He said of France: “This sleeping beauty [Paris] is waking up, and it is a beauty,” he said, pointing out that France had far more to offer the business community than just “love, restaurants and style”.
De Lencquesaing said France could potentially host between 20,000 and 25,000 people in the event that companies began moving some staff out of the City of London because of Brexit. Paris was a “concrete offer” for those looking to move, he said, as it has size and a wide range of services.
His counterpart from Luxembourg, Mackel, however, said Brexit was not something to be thankful for but rather “something that will be a negative factor for all of Europe – the UK had a very important role at the table in Brussels”.
Mackel was on his second visit to London in the past week but said he was in town to “see how we can continue to do business in the UK” and not to “lure business away”.
“I don’t think anybody will win. We are not rejoicing in this, we are not looking at this as a major opportunity but we all see [that] each of these financial centres have these strengths.”
The chief factor in determining whether or not financial firms will look to move staff away from London following the referendum result is ‘passporting rights’. If, in negotiations over the terms of its exit, the UK can retain access to the single market, then it will retain the right to sell products and move staff freely around the EU.
However, success in achieving this will likely hinge on the thorny issue of migration, which the UK wants more control over but which EU law stipulates goes hand-in-hand with access to the region’s economic area.
Mackel said: “It’s not us [the EU] who don’t want to give you passporting rights. It’s the British people who put you in the position where you will not be able to claim that.”
Deloitte’s Vedi noted that financial services firms had some very tough decisions to make and that it was inadvisable to assume that positive Brexit negotiations would follow.
A number of large banks and asset managers have already said publicly that they are considering options for relocating certain staff. JP Morgan was the first large bank to do so on June 24, the day after the vote, but others – including Morgan Stanley and Citigroup – have indicated plans to do the same.
London’s status as a hub for clearing euro-denominated transactions in the EU has emerged as one of the key battlegrounds for politicians and financial services practitioners.
The ECB’s efforts in 2014 to shift euro-denominated clearing into the eurozone were rejected by the European Court of Justice, but the Brexit vote has prompted the likes of French President François Hollande to raise the issue again.
Väth said:”I cannot foresee that euro clearing will remain here [in London]. There are a few obvious areas, with clearing, probably settlement will also be a question mark.”
Mackel added it was important to be aware of the legal implications:”Once you are not a member of the EU any more, legally speaking you cannot do euro clearing any more. In the US, they say elections have consequences. So do referenda.”
De Lencquesaing, who is also an independent director of EuroCCP, a European equities clearing house, said: “It’s not to say it will have to be in France. Obviously we have in the Netherlands and in Germany, CCPs, and Milan.”
Additional reporting by Bernard Goyder