London: Citigroup is ready to face Brexit in whatever form it finally manifest, ranging from a softer negotiated exit of the UK from the European Union (EU) retaining passporting of financial transactions, or a hard Brexit cutting off the country from rules of the single market, restricting banks and financial institutions in UK conducting business in EU.
“Regardless of what happens with Brexit, Citigroup will continue to provide products and services we have been providing in both UK and EU countries and London will remain important international hub,” said Jim Cowles, EMEA CEO of Citi.
A recent ruling by UK’s High Court has added further uncertainty to the Brexit schedule of the government. The court has ruled that Parliament should have a say before the UK invokes Article 50 of the Lisbon Treaty — which triggers up to two years of formal EU withdrawal talks. The government’s appeal against the High Court ruling that MPs must vote on triggering Brexit will be heard in the Supreme Court from December 5.
There have been recent reports suggesting that post-Brexit, Citigroup will be relocating staff to other European locations. Earlier this year, the bank merged its UK and European operations now headquartered in Dublin.
“This gives us a clear competitive advantage in terms of formulating our business plans for Europe, post-Brexit. However, at this point in time we have not decided on moving people or resources across borders ahead of Brexit plans,” Cowles said.
Earlier this week, The Sunday Times reported that Citigroup conducted a board meeting in Dublin last month, and was trying to explore options for office space in the Irish capital. The newspaper quoted a source saying, “They have been testing the Irish political and regulatory regime on a macro level.”
Citi officials said the bank has not started any transfer of people from London to any other European location as part of post-Brexit business plan. But bank officials said there have been normal staff moves across geographies as part of regular operational requirements.
Officials said the bank’s brokerage business based out of London could be affected if passporting is impacted.
“We have total of 19,000 people in 21 EU countries including the UK. We are closely watching the developments. We have the optionality [of moving] based on the course Brexit negotiations would take. We are fully prepared for the outcome whatever it may be,” said Cowles.
Officials confirmed that several dozens of people across the organisation are working on the bank’s potential options in the event of a hard Brexit. “The planning at this point is not about moving people to a new location. Our teams are weighing various options to face different scenarios related to Brexit,” said Michael Lavelle, Head of Corporate and Investment Banking, UK.
While many banks are considering the option of moving their European businesses to other European financial hubs, the move could be very expensive, given the fact many of them have huge infrastructure and staff concentration in London.
With the Brexit threat looming, London’s financial industry circles are buzz with talks of many banks moving their European business out of London. Currently Ireland is being considered an attractive destination for many banks because of English language, its proximity to London and the relatively flexible labour laws.
A number of banks such as JPMorgan Chase & Co. JPM and Bank of America Corp. have either already established their offices in Dublin or have the license to conduct business there.
Passporting restrictions to hurt banks
London: One of the biggest fallouts of Brexit will be that British banks can expect reduced access to the market for financial services in the 27 EU states.
In the event of a full exit of UK from EU translating into UK’s withdrawal from rules of the single market which include free movement of worker could mean UK banks could lose the so called banking passporting.
Banks and other financial companies can be authorised to do business in one member state of the EU, or the slightly wider European Economic Area (EEA), and then ply their trade across the region without having to be separately authorised in each country.
The EEA is a grouping made up of the EU, plus Norway, Iceland and Liechtenstein who have access to the EU’s single market.
A bank using this system can provide services by offering them from its home base to a customer in another country, or it can establish a branch abroad.
It is widely used by financial firms in the EU. They establish themselves in one place in the EU, typically in London as the continent’s dominant financial centre, and use that as their headquarters for selling services across the single market.
If the banking passport is no longer available to British-based firms, then some operations would clearly have to shift to a location inside the EEA.
