In this article, we explore Brexit's impact on banks and the financial sector and their response to legal uncertainty.
Banking is one sector which is set to endure enormous changes in light of Brexit. EU and UK relations are bound to face complexity and uncertainty leading up to and after Brexit. European banks have already severely restricted their dealings with the UK since the leave vote, removing €350 billion of UK assets from their balance sheets in 12 months. The European Banking Authority is moving its headquarters from London to Paris because of Brexit.
The EBA have come to an agreement that the potential of a ‘cliff edge’ Brexit is the main issue hanging over Europe’s banking system. EBA polled many banks regarding their annual risk-assessment and strategy. Results showed that the UK coming out the EU with ‘no deal’ and how that would affect trading and economic relations is their main concern. The concern is caused by legal uncertainty around financial contracts, economic deals, data protection and uncertainty around the enforcement of court judgements.
Banks have started to take action by shifting operations out of the UK. Workers are in the unpleasant position of anxiously waiting to find out how many will be moved to new financial hotspots like Frankfurt, Dublin and Paris. Investment banks, who donated heavily to the Remain campaign, have reacted to Britain’s referendum result, with some of London’s largest institutions approaching regulators to secure licences and lining up executives for relocation.
US banks including JPMorgan Chase, Bank of America and Goldman Sachs have large operations employing tens of thousands of people in the UK. Historically, they have set up businesses in Britain and subsequently used its right to free movement of people and goods, to effectively market them in the rest of the Member States.
HSBC said before the vote that it could move as many as 1,000 trading jobs to Paris in the event of a Leave vote. But because the bank already has a Paris office, it could defer any decision until right before the UK’s exit comes into effect. This employment and regulatory uncertainty causes enormous stress and anxiety for people whose careers depend on the outcome of Brexit.
Silviya Hristova is a legal intern at Pure Business Law. She is an LLB Law Graduate from SOAS, University of London as of September 2017 and will embark on an LPC/LLM course at BPP University in January 2018. She has always had an interest in law and greatly enjoys being able to put her skills into practice within her internship at Pure Business Law.