Brexit could jeopardize tens of thousands of finance jobs

By Huw Jones and Andrew MacAskill

LONDON (Reuters) – Tens of thousands of jobs in Britain’s financial services sector could be lost if euro clearing shifts to mainland Europe and full access to the bloc’s single market is lost, have said. senior industry officials said on Tuesday.

London has become the world’s largest center for clearing euro-denominated financial contracts, and some continental policymakers want this to be transferred to the eurozone after Brexit.

Xavier Rolet, Managing Director of the London Stock Exchange Group owner of the world’s largest clearing house for euro-denominated contracts, said that without clarity on what will happen to markets after Brexit, clearing customers in London will leave.

Tens of thousands of jobs could leave London, not only clearing customs, but also from ancillary services such as software and IT, risk management and administrative staff, Rolet told the House of Commons committee. Treasure.

To prevent customers from leaving London when Britain begins formal divorce talks with the EU in March, existing rules should remain in place until 2022 to avoid disruptions that could jeopardize financial stability, said Rolet.

Already, banks with large operations in London say they will step up lobbying EU officials as they run out of arguments to convince the UK government that the industry needs access to the single market.

Douglas Flint, Chairman of HSBC Bank told lawmakers that banks without operations elsewhere in the EU would likely trigger migration plans immediately after divorce talks with the EU began in March, estimating that ‘tens of thousands’ of jobs are tied to the rights EU “passport”.

Currently the banks have passport rights, allowing them to operate in the 28-nation bloc from a base in Britain. They could lose that right with Brexit.

Any job losses in the banking sector would depend on how UK lenders negotiate new licenses with regulators on the continent, raising questions about back-office staff in UK regions.

This could hit JPMorgan Citigroup and Deutsche Bank which currently employ thousands of back-office staff in regional towns across Britain in places such as Bournemouth and Glasgow.

“Obviously you would need to move the front end of the business,” Flint said. “The question would be whether trading would allow middle and back office, settlement, risk management, accounting, etc. to be done outside the EU 27.”

Rolet said that since Britain’s EU referendum he had heard calls from continental European regulators to customers, warning them of the risk of euro clearing leaving Britain.

“This has resulted in commercial pressure on our business,” Rolet said.

The EU is reviewing its derivatives trading and clearing rules, which could include ways to make it impossible to clear euro-denominated contracts in the UK, Rolet said.

“These kind of pesky, well-targeted, seemingly minor regulations that actually have a major impact on customer behavior.”

This would amount to effective currency controls in the EU and backfire on the bloc, he added.

Flint, Rolet and Allianz Global Investors Vice President Elizabeth Corley, appearing before lawmakers, all said a transition agreement should last until at least 2021 to give companies enough time for a smooth start. of the EU.

Flint said one of his biggest concerns was that if Britain left the EU, the regulatory rules that have converged in the decade since the start of the global financial crisis risked being fragmented, which would jeopardize economic stability.

“After 10 years of being put together, this would, in my opinion, be considered in hindsight as one of the worst actions that could have taken place,” Flint said.

(Reporting by Huw Jones and Andrew MacAskill, editing by Susan Thomas)