Maybe there won’t be a hard Brexit after all? With Britain due to leave Europe on 12 April, Prime Minister Theresa May yesterday appeared to rule out a hard Brexit as she pursues a softer option in cross-party talks with Labour leader Jeremy Corbyn.
However, if 24 hours is a long time in politics, it can be aeons in Brexitland – and what applies this morning may well not hold in 12 hours’ time.
This being so, it’s too early for all the London finance professionals who are on standby for an immediate move to the Continent, to stand down. While a soft Brexit is more likely, a hard Brexit remains the default.
So, who will go first? Three categories of banking job are likely to be at the forefront of any moves.
Salespeople and traders in the front office
Salespeople are at the very front of the Brexit transfer queue. Not just any salespeople – salespeople dealing with clients in the European Union. Many have moved already – witness the recent transfer of Christian Ahrling, the head of European rates sales at Bank of America, to Paris.
“We were told in the middle of last year that, from one day to another, we might have to relocate to Europe in the case of a hard Brexit,” says a European salesman at JPMorgan. “We still don’t know what’s going on.”
The need to move trading jobs is less clear cut. As the Financial Times noted at the weekend, most banks are still relying on the existence of a ‘back-to-back’ booking model, under which trades made in the EU will be duplicated and booked in London, such that most risk-taking staff can remain in London too.
Samir Assaf, the global head of banking and markets at HSBC, told the FT there could be a “lot of people moves [to Europe]” if regulators rule against back-to-back booking models. This is unlikely to happen before 12 April, but banks will be mindful of documents issued by the European Central Bank in August, which said EU operations must not be mere shell units and that banks will need local trading capabilities that are “appropriate for executing trades and hedging risks” without reference to other offices if this becomes necessary in a ‘resolution scenario.’ For this reason, key traders are also likely to move at short notice if the Brexit is hard.
Key European dealmakers
London corporate finance teams have been less affected by Brexit. And even if Brexit is hard and messy, banks are unlikely to transfer heavy corporate finance cavalry into the EU.
It is, however, likely that key dealmakers will be compelled to move. “In the case of a hard Brexit, the ‘deal captain’ will need to be on the ground,” one banker told Les Echos yesterday. Support staff could arrive later, he added.
Risk and compliance staff
Lastly, banks are likely to move control staff at short notice. The ECB said in August that, “particular attention will be paid,” to banks’ local risk management capabilities, with an emphasis on ensuring that banks are able to properly regulate their local European trading and hedging activities. Ultimately, banks will be expected to set up local risk committees.
There are signs that banks are struggling to fill existing European risk roles. Paris headhunter Vendôme Associés said there have been several transfers of risk staff from London to France, while Antony Labylle, a recruitment consultant at Huxley in Paris, said there’s a shortage of compliance staff who understand the local market. In many cases, therefore, banks have held off hiring large numbers of local risk staff – preferring to move people from London at short notice if Brexit goes as badly as it could.
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