Select Milano Monitor

Select Milano Monitor

Select Milano Monitor 15/01/2017

Mondo Visione
12 January 2017
On 9 January 2017 Italy’s financial regulator (CONSOB) established a new body called the Arbitration for Financial Disputes.
Disputes up to €500k can now be submitted to it, and all submitted disputes will aim to be resolved within 6 months.
The new body has been established to create a fast and low cost method to resolve financial disputes that take place in Milan.
The measure was advocated by Select Milano as part of a programme of reforms to make Milan an attractive location for businesses which will need to relocate out of London as a result of Brexit.
Commenting on the development Bepi Pezzulli, Chairman of Select Milano said: “This is another step in the right direction to make Italy more competitive and business friendly. By creating this arbitration body, Milan is offering institutions based in Milan the ability to access quick and efficient dispute resolution and a legal and judicial ecosystem similar to the one in London.  Combined with the other reforms we have helped achieve, Milan is now one of the most attractive locations for businesses in Europe”
In addition to the establishment of Arbitration for Financial Disputes, other Select Milano proposals that have resulted in legislation include reforms to the “brain redux” law, amendments to capital gains tax and the creation of the European Economic Interest Grouping (EEIG).
Bepi Pezzulli added, “We are in active dialogue with institutions considering where to locate parts of their business which may need to move as a result of Brexit.  Milan is a natural home for Euroclearing given the existing market infrastructure in place and we hope to see further progress in these discussions over the coming months.”
By Mike Fox
12 January 2017
It was announced this week that Italy’s financial regulator (CONSOB) has established a new body called the Arbitration for Financial Disputes and disputes up to €500k can now be submitted to it, and all submitted disputes will aim to be resolved within 6 months.
The new body has been established to create a fast and low-cost method to resolve financial disputes that take place in Milan.
The measure was advocated by Select Milano as part of a program of reforms to make Milan an attractive location for businesses which will need to relocate out of London as a result of Brexit.
Commenting on the development Bepi Pezzulli, Chairman of Select Milano said:
“This is another step in the right direction to make Italy more competitive and business friendly. By creating this arbitration body, Milan is offering institutions based in Milan the ability to access quick and efficient dispute resolution and a legal and judicial ecosystem similar to the one in London. Combined with the other reforms we have helped achieve, Milan is now one of the most attractive locations for businesses in Europe.”
Italy’s financial regulator has been on a string of public warnings lately regarding unregulated brokers targeting Italian citizens, the latest of which came back in December when 10 new brokers were warned against.
By Valentina Ieva
11 January 2017
The capital city of Lombardy is qualifying as the bridge between the Eurozone and the UK capital. Frankfurt, Paris, Luxembourg and Dublin are its competitors to get London’s inheritance. Diplomatic and legislative efforts are needed to defeat the other bidding cities. After Britain’s leave last June, manoeuvres started to get hold of London’s future.
Of course, London is trying to open up to design by introducing the first London Design Biennale edition (coming with the London Design Festival in September). A new format drawing inspiration from Venice’s Biennale maybe to dispel the referendum troubles with creativity.
But Italy has the Milan Furniture Fair: a continuously expanding and evolving design fair, specially because of the October Moscow and the November Shanghai editions.
Set aside the Expo. It brought 21 million visitors and it acted as a catalyst for important projects and infrastructure among which the metro third line completion and the remaking of some of the Navigli areas. So not only the capital city of fashion, night-life and haute cuisine: the Gran Milan surely qualifies to yearn for the title of Europe’s Capital City.
Since the 2013 legislation facilitated the visas and allowed for enterprises to sign more flexible contacts, the city is attracting european and international start-ups more than ever. The trend before Brexit was to open up in London.
“Brexit isn’t good news per se and it isn’t good news for Europe”, Milan’s mayor Giuseppe Sala stated during his first public appearance at the 242 anniversary of the foundation of the Finance Guards – “but I’m pretty sure it’ll become an opportunity for Milan” – he added.
Meanwhile, Italy is working with its Select Milano committee made up of finance professionals and academics. Select Milano, since the Brexit, has developed the idea of the development of a business diplomacy to define a new economical paradigm and to establish a new set of commercial relations between Italy and the UK. The aim is to involve Milan and the City to develop a Eurozone financial district in Milan and to enable communication between central and local governments to work out new tax breaks and adequate measures to avoid the country risk.
As the president of the AIBE (the Association of the Foreign Banks in Italy) stated in an interview for the Corriere della Sera: “It is clear that there will be consequences. London messed herself up!”
La Repubblica
By Raffaele Ricciardi
12 January 2017
Summary from Italian:
  • This article discusses the resolution currently in the Finance Committee which will seek to help bring the Euro clearing market to Milan. The market handles €570bn per day, and counts 11k in staff numbers and as such would be highly significant for Milan to capture.
  • Deputy Gregorio Gitti says that there’s a limited time frame to make this happen in Milan. Gitti, along with other Deputies Maurizio Bernardo and Alessandro Pagano, is leading the drive for the Euro clearing resolution in the parliamentary Finance Committee. They expect it to pass sometime this week.
  • Select Milano’s role in this is mentioned, with Bepi Pezzulli noting that they do not fear the competition of Frankfurt and Paris as Italy is taking such positive steps in the right direction to make this happen. He also notes that Milan can act as an answer to the populists who claim Europe is just centred on Germany.
  • It is noted that the government has already secured the brain redux and tax incentive resolutions, so its commitment is clear. The new arbitration department within the CONSOB is another great step. After the EEIG resolution, the final piece to the puzzle will be the creation of the Milan Financial District itself which will be taken up by the Economic Development Ministry.
  • In terms of infrastructure, Milan already has its own chamber for clearing activities that works with €10bn in transactions daily. Other infrastructural investments underway include a more direct route to the airport.
Milano Finanza
By Pasquale Merella
14 January 2017
Summary from Italian:
  • Brexit went from being a risk to a problem to an opportunity. Various European cities are vying to become London’s successors in a post-Brexit world including Frankfurt, Paris, Dublin, Luxembourg and even Stockholm.
  • In Milan, the movement to snag the European Medicines Agency is already underway. In addition, many (including Select Milano) are campaigning for the Euro clearing market to be transferred there, bringing long-term economic growth and industrial development, among other benefits.
  • The European Market Infrastructure Regulation (Emir Directive) needs quick answers to questions of risk — Milan’s solution is the creation of the Financial District which will help realise the Industry 4.0 plan.
  • In a positive development, the issue of the historic slowness of the Italian justice system is solved with the new CONSOB arbitration body.
By Luca Zorloni 
9 January 2017
Summary from Italian:
  • This article discusses Milan’s movement to create a financial district and establish a bridge between London and the Eurozone post-Brexit, competing against other cities like Frankfurt, Paris, Luxembourg and Dublin to gain business.
  • Finance Committee Chair Maurizio Bernardo is quoted as saying that key financial operators and intermediaries risk losing their EU passporting rights and should move within the Union.
  • Select Milano’s work in particular is noted, with a quote from Bepi Pezzulli on some of the incentives and measures proposed like the brain redux law and the EEIG formation.
  • Deputy Gregorio Gitti is also quoted, discussing the importance of the role of arbitration to the EEIG. He also states that the government can work to make Milan even more competitive through tax incentives which will drive international business figures to Milan.
  • The power to make this happen is now in the hands of government which will vote early this year on the Finance Committee’s resolutions regarding the Milan Financial District.
  • The article finishes with Bepi Pezzulli suggesting more effective city marketing by Milan in four branches  –  Visit Milan, Study in Milan, Work in Milan and Invest in Milan.
  • This article also features on Edilportale.
Revue Banque
13 January 2017
Summary from French:
  • A summary of the cities vying for post-Brexit business in the asset management industry, mentioning in particular Dublin, Luxembourg, Paris and Frankfurt, with Berlin, Amsterdam and Milan listed as secondary contenders (due to tax advantages and existing infrastructure in the primary contenders). It is noted that banks with operations in London are primarily concerned about the loss of passporting rights and divergences in regulation.
  • Milan’s “soft” approach stands out as its strategy involves twinning Milan with the City and creating a financial citadel which replicates the fiscal, administrative and legal ecosystem of London.
eFinancial Careers
By Thierry Iochem
12 January 2017
Summary from French:
  • Analysis of the purported top contenders for gaining post-Brexit financial business — Frankfurt and Paris. Frankfurt is noted as besting Paris in macroeconomic health, suitability as a financial centre, proximity of regulators, taxation and labour laws, salaries, cost of living and knowledge of English.
  • Paris bests Frankfurt in city marketing effectiveness, number of banks, efficiency of regulators, infrastructure, lifestyle and FinTech.
  • Bepi Pezzulli is quoted in the section which discusses the differences in taxation and labour laws between Frankfurt and Paris: “Paris has got a very high tax rate and its labour legislation is a nightmare.” This quote was taken from last week’s Financial News piece.
Milan and Brexit:
Milano Today
14 January 2017
Summary from Italian:
  • In Milan’s movement to attract the European Medicines Agency post-Brexit, its candidacy may now be at risk as the agency may move sooner than expected, with its budget hinting at a transfer within the next year.
  • As Milan’s Expo area, which the city had previously offered as the headquarters for the Agency, would not yet be ready for use by the time of transfer, the former Falck headquarters in Sesto San Giovanni has been offered up instead. However, even this will not be ready before end-2017. A temporary headquarters is being sought out to house the EMA’s 600 workers in case Milan is chosen.
  • AdnKronos reports that Milan Mayor Giuseppe Sala and Lombardy Region President Roberto Maroni have written a letter to Prime Minister Paolo Gentiloni to urge him to take political action to secure the EMA in Milan.
Europe and Brexit:
By Zlata Rodionova
11 January 2017
The chief executive of the London Stock Exchange has warned the UK’s vote to leave the EU poses a risk to the global financial system and could cost the City of London up to 230,000 jobs if the Government fails to provide a clear plan for post-Brexit operations.
Speaking to MPs on the Treasury Select Committee, Xavier Rolet said LSE customers simply “would not wait” for clarity over Britain’s divorce from the EU before moving.
He said: “I’m not just talking about the clearing jobs themselves which number into the few thousands.But the very large array of ancillary functions, whether it’s syndication, trading, treasury management, middle office, back office, risk management, software, which range into far more than just a few thousand or tens of thousands. They would then start migrating.”
If the City did lose its ability to clear transactions denominated in euros – which was a contentious issue even before the Brexit vote – Rolet said 232,000 roles could be lost, citing research by consultants Ernst & Young for the LSE.
His comments came as Douglas Flint, the chairman of HSBC who is also giving evidence to the Treasury Select Committee, said more clarity is needed on Brexit negotiations to prevent companies including his own firm from moving thousands of jobs out of London.
He said banks did not want to move operations outside London but they had to plan for the worst.
Ahead of the EU referendum in June, HSBC said it could move 1,000 roles to its operations in Paris.
Mr Flint confirmed on Tuesday that the same number of roles was still at risk and that HSBC was ready to take “pre-emptive action”, pointing out that the bank also had operations in Ireland and the Netherlands.
He compared the London’s financial system to a “Jenga tower”.
He said: “You don’t know what will happen if you pull one small piece out — it might have a big impact.”
Together with Elizabeth Corley, of Allianz Global Investors, who was also speaking in front of the committee, the three City bosses all called for clarity on “transition arrangement” in the next eight to 12 weeks.
“I think there is a way to turn this process into a positive for both [the UK and the European] economies,” Mr Rolet said, adding however that a period of stability is essential.
City companies fear that a hard Brexit will result in the UK leaving Europe’s single market which could signal the loss of crucial passporting rights, that currently allow them to sell their services freely across the rest of the EU and give firms based in Europe unfettered access to Britain.
Companies are pressing Britain and the EU to agree on a transition deal that would keep many of the current arrangements for up to five years, helping to cushion them from the effects of Brexit.
A cross-party group of peers, in December, said Britain’s financial sector must be offered a “Brexit bridge” to prevent companies moving to rival locations such as New York, Dublin, Frankfurt or Paris.
However, on Sunday, Prime Minister Theresa May said Britain cannot expect to hold on to “bits” of its membership with the EU after Brexit, suggesting The UK is heading towards a hard Brexit.
The pound fell to a 10-week low following Ms May’s interview.
By Leigh Thomas
12 January 2017
The Bank of France is seeing serious interest from international firms looking to boost their activities in Paris following Britain’s Brexit decision, the French central bank’s governor said on Thursday.
In a New Year’s address to the Paris financial sector, Francois Villeroy de Galhau said the industry had to remain mobilised in efforts to attract business to the French capital.
“We have signs of very significant interest from international firms with which we are discussing discretely but seriously,” Villeroy said.
By Joe Mayes
13 January 2017
Brexit is pushing up house prices in Frankfurt as buyers expect wealthy professionals to move there from London, according to research by Deutsche Bank AG.
“Impetus from the Brexit vote caused prices to surge in 2016,” the report published Friday said. “Probably in anticipation of wealthy London bankers moving to the city, prices for family homes rose particularly sharply.”
Frankfurt, an established financial capital at the heart of Europe’s biggest economy, has been touted as a potential beneficiary of Brexit as financial institutions consider shifting operations out of London to retain European market access. The city is home to the European Central Bank and hopes to become the new headquarters of the European Banking Authority, the regulator currently based in the U.K. capital.
Prices for family homes in Frankfurt are up 11.75 percent year-on-year, compared to a 6 percent increase across the country’s other major cities, the report said.
“Because of the high level of migration to Frankfurt, rents and prices are expected to continue to rise rapidly over the coming years,” the report said.
By Andrew MacAskill and Anjuli Davies
Banks with large London operations say they will step up lobbying European officials because they are running out of arguments to convince the British government the industry needs single market access after Britain leaves the European Union.
Banks have focussed on pressuring British officials to push for as much market access as possible since voters decided seven months ago to leave the EU. They held fewer meetings with European officials, according to several senior sources in the financial services industry.
The focus is shifting because after scores of meetings and research reports, banks, which say they may begin moving staff and operations out of London in the next few months if there is no clarity, feel they are running out of new points to make.
Prime Minister Theresa May said on Sunday she was not interested in Britain keeping “bits” of its EU membership, interpreted by some as signalling she will favour immigration controls over access to the single market.
Banks are now planning a new round of lobbying to highlight how a hard Brexit could harm the EU and the UK. They have identified French politicians, EU regulators and government officials, as key groups to win over.
“The battle for Britain is over, the battle for France is about to begin,” said one senior lobbyist.
Another senior lobbyist for one of the major global banks said he will spend more time in Brussels this year to target the EU’s chief Brexit negotiator Michel Barnier and his teams as well as Didier Seeuws, a Belgian diplomat, who is helping coordinate the Brexit negotiations.
Another lobbyist said he is planning to visit Paris to meet with French politicians and regulators later this month.
Britain’s position as Europe’s financial centre is emerging as one of the main collision points in the Brexit talks. Some European politicians see an opportunity to challenge British dominance of finance after decades of viewing its free-wheeling “Anglo-Saxon” model of capitalism with suspicion.
EU leaders like French President Francois Hollande have said they plan to weaken Britain’s grip on finance by, for instance, demanding the lucrative business of clearing euros should move to the euro zone.
Finance is Britain’s most important industry, accounting for about a tenth of its economic output and is its biggest source of business tax revenue.
But Britain also acts as “the investment banker for Europe”, Bank of England Governor Mark Carney said in November, with more than half the equity and debt raised for European governments and companies done in the UK.
Banks will argue that Europe depends on the strength and the depth of the financial sector in London to service its economy and companies. If access to the EU is cut off, regional financial stability could be in jeopardy, they will say.
UK-based banks had total outstanding loans of more than 1.1 trillion pounds to European companies and governments at the start of 2016.
The British government has also privately appealed to financial organisations to make their case in Europe if they want a transitional period where their ability to operate in the EU would be phased out gradually over several years.
Finance minister Philip Hammond told a meeting of finance executives at the end of November they should lobby European governments if they want to secure a post-Brexit transitional deal, according to two people who were present.
Hammond made the comments at the annual dinner of the All-Party Parliamentary Group on Wholesale Financial Markets and Services, attended by executives from the major British and international banks, according to the people who attended.
“He basically said we need a transitional deal to avoid a cliff edge effect, but the EU also needs to argue for it,” one person at the dinner said. “He was implying that we need to help the government prepare the ground.”
A Treasury spokesman, when asked for comment, reiterated Hammond’s previous statements to lawmakers that Europe will harm itself if they use Brexit to undermine London’s position as the region’s principal financial centre.
Bankers say more work is needed on forging a consensus between Britain and Europe on what any transitional deal may look like. European officials say they will not discuss such a deal before Britain triggers Article 50 of the EU’s Lisbon Treaty to start the process of leaving the EU.
“Everyone has a different definition of what it means in Europe and within Whitehall. We’re trying to get a common view on what transition means,” one of the lobbyists said.
The British government’s relationship with business has gradually improved after months of friction after the vote.
It hit a low point during the Conservative party conference in October when May attacked a “rootless” international elite and officials privately suggested banks would get no special favours in the Brexit negotiations.
Nevertheless, banks feel they have largely finished putting forward their case for single market access.
“We feel we’ve been lobbying the UK government to death. We’ve presented every piece of evidence, every report, research, you name it,” one of the lobbyists said.
“We’ve been repeating ourselves for a month or two now… What else do they really need from us now?”
One government official, who asked not to be named, said regular dialogue with the finance sector will continue, but the number of meetings may reduce.
“The door is open if people want to talk to us. There is not an arbitrary point at which speaking to people is no longer helpful,” the person said. “But it has been intense, as we wanted it to be, and that intensity may ease.”
The News Poland
10 January 2017
The Polish government is considering applying for the transfer of two key EU agencies from London to Poland, the Rzeczpospolita daily has reported.
The agencies, the European Banking Authority (EBA) and the European Medicines Agency (EMA), will have to be moved from the British capital following the country’s exit from the European Union, which could take place by 2019.
The European Banking Authority was created six years ago in order to supervise the financial stability of the whole bloc.
The European Medicines Agency was formed 22 years ago but is equally important – notes Rzeczpospolita- as it approves the introduction of new medicines onto the EU market.
“Our Brexit-effect team has established the benefits of locating those institutions in Poland,” Polish European Affairs Minister Konrad Szymański told the daily.
“Our analysis must be thorough and determine what the impact of the transfer would be for the business, scientific and academic sectors,” he added.
The relocation idea has already enticed several EU member states, with Paris, Frankfurt, Milan, Luxembourg and Vienna interested in hosting the European Banking Authority, and Denmark, Spain, Italy, Ireland and France eyeing the European Medicines Agency.
According to Rzeczpospolita, applying to Brussels to relocate the EBA and EMA to Poland would be a strong signal of a more pro-European stance by the ruling Law and Justice (PiS) party after months of tensions between Warsaw and Brussels. The move must be approved by the entire government.
The Guardian
By Jennifer Rankin
13 January 2017
The EU’s chief negotiator in the Brexit talks has shown the first signs of backing away from his hardline, no-compromise approach after admitting he wants a deal with Britain that will guarantee the other 27 member states continued easy access to the City.
Michel Barnier wants a “special” relationship with the City of London after Britain has left the bloc, according to unpublished minutes seen by the Guardian that hint at unease about the costs of Brexit on continental Europe.
Barnier told a private meeting of MEPs this week that special work was needed to avoid financial instability, according to a European parliament summary of the session. “Some very specific work has to be done in this area,” he said, according to the minutes. “There will be a special/specific relationship. There will need to be work outside of the negotiation box … in order to avoid financial instability.”
Barnier later moved to clarify his comments, claiming on Twitter that he referred to a “special vigilance” required to ensure the EU remained financially stable after Brexit.
The remarks hint at concern among senior Brussels policymakers about the damaging consequences of Brexit for the continent if Europe’s biggest financial centre is cut adrift.
A spokesman for the European commission insisted that the minutes, which were drawn up by European parliament officials, did not “correctly reflect what Mr Barnier said”. A source present at the meeting, however, described the minutes as “more or less accurate”. Barnier discussed the problems of financial services, the source said, although the negotiator’s preferred options were not clear.
The suggestion recorded in the minutes does mirror the view of the governor of the Bank of England, Mark Carney. He told MPs on Tuesday “there are greater financial stability risks on the continent in the short term, for the transition, than there are for the UK”.
Carney said other EU nations relied heavily on the City for their financial needs and could face serious problems if international banks based in London were no longer able to gain easy access to European countries and corporations. “If you rely on a jurisdiction [the UK] for three-quarters of your hedging activities, three-quarters of your foreign exchange activity, half your lending and half your securities transactions, you should think very carefully about the transition from where you are today to where the new equilibrium will be,” he said.
The fear is that European governments and companies would find it harder and more expensive to raise capital if they were denied access to the City, which acts as Europe’s investment bank. Countries such as Italy, with very large national debt, are concerned that their economies would become even more fragile if financing costs rose.
The minutes indicate that Barnier repeated during Thursday’s meeting the well-worn mantra that the UK should not be allowed to cherry-pick the bits of the EU it likes. But his apparent concern about financial instability contrasts with bullish statements by EU leaders about swooping on London’s financial sector business.
In the days after the EU referendum, French president François Hollande said London should no longer be allowed to handle any transactions denominated in euros. These “euro clearing operations” are worth about $150tn a year. Some cities, including Paris and Frankfurt, have launched glossy marketing campaigns aimed at persuading bankers to leave the City of London.
Behind the scenes, EU officials are maintaining that the UK will be hardest hit by Brexit, but they are concerned about the costs facing continental Europe.
One senior source recently told the Guardian that closing London as a euro clearing centre was likely to increase costs for EU banks and companies. Another source has voiced concern that there would be limited gains for rival financial centres as a result of a smaller European single market.
On Friday, one the City’s most senior bankers welcomed growing recognition of the risk to the global financial system. “The industry and the regulatory community, and the political community, are fully aware of the importance of maintaining financial stability,” said Douglas Flint, chairman of HSBC, Europe’s largest bank.
“There are clearly negotiating positions that will evolve over the next several months and years but the importance of preserving the functionality of the markets that exist today … is seen by everybody,” he said, following similar warnings to the Treasury select committee.
Flint suggested a new special relationship with the City could be achieved with a treaty guaranteeing “mutual recognition” of regulations. City firms are able to do business across the EU by using a “passport”, which will disappear when the UK quits the EU.
Barnier, a former EU commissioner in charge of financial services who led the post-crisis crackdown on bankers’ bonuses, is well placed to understand the financial risks of Brexit.
According to TheCityUK, the lobby group representing the the City, London is Europe’s biggest financial centre: 75 EU banks have major branches in the capital, holding £1.2tn of assets, almost one fifth of all UK bank assets. Twice as many euros are traded in London than in the 19 countries of the single currency combined.
Carney is increasingly becoming embroiled in a war of words with his continental colleagues over who faces the biggest Brexit risks.
Earlier this week, Malta’s finance minister, Edward Scicluna, said that the UK would suffer greater damage, although the rest of the EU would also suffer.
Barnier, according to the minutes of the meeting with MEPs, described Brexit as a “unique and extraordinary negotiation” that had to result in a outcome that showed the best option was being an EU member. He stressed there would be “no aggressiveness, no revenge, no punishment” but also no naivety.
Both lines are consistent with his only public statement on Brexit, when he stressed the interests of the rest of the EU were his top priority.
The European parliament must give its consent to the final Brexit deal and Barnier, who briefly served as an MEP, promised to involve them throughout the process.
In a sign of ambivalence about a transition deal, he told MEPs it was not part of the remit of the EU exit talks and they were waiting to see what the UK would ask for. This is consistent with earlier remarks, when he said it was “difficult to imagine” a transition deal because the UK did not know where it was heading after Brexit.
He made clear that the UK would have to follow EU law if it wished to remain a member of the single market during the transition period. This reinforces comments by Malta’s prime minister, Joseph Muscat, who said this week that the European court of justice would be “dishing out judgements” to the UK during any transition period.
Some MEPs’ mistrust of the UK comes through in the minutes of Barnier’s meeting with the MEPs who chair the European parliament’s main committees, including foreign affairs, trade, single market and budget.
Elmar Brok, the German centre-right chair of the foreign affairs committee, reportedly voiced concern the UK would become “a Trojan horse of the US” – echoing fears that date back to the time of Charles de Gaulle.
Werner Langen, a German centre-right MEP who is leading the investigation into the Panama Papers, wants to ensure the UK accepts international rules to clamp down on tax avoidance. Some EU politicians are worried the UK will embark on “a race to the bottom”, by slashing corporate taxes, to compensate for Brexit.
Barnier, however, said he expected the UK to stick to existing commitments to enact more than three dozen laws to combat money laundering and tax avoidance.
By John Detrixhe and Silla Brush
11 January 2017
Mario Draghi said the European Central Bank should maintain oversight of U.K.’s vital clearing business even after Britain leaves the European Union, touching on an issue that became a battleground after the June referendum.
The supervision of U.K. clearinghouses has been thrown into question since the Brexit vote, with both Germany and France seeking to chip away at London’s dominance in the business. Britain’s exit could lead to a loss of ECB oversight of such institutions, ECB President Draghi said in a letter to lawmaker Pervenche Beres.
“It will be important to find solutions that at least preserve, or ideally enhance, the current level of supervision and oversight,” Draghi said in the letter, dated Jan. 10.
While Draghi didn’t mention it in his letter, the ECB has tried in the past to claw euro-derivatives clearing away from the U.K. Some $2.7 trillion of interest rate swaps change hands each day, and the biggest clearinghouse — which stands between derivatives traders to prevent a default from spiraling out of control — is a London-based unit of London Stock Exchange Group Plc. Intercontinental Exchange Inc. also operates a U.K. clearinghouse.
“The location of clearing houses for euro payment and settlement services after the U.K. leaves the European Union will depend on details of the exit agreement,” said ECB spokesman Rolf Benders.
Dollar interest-rate swaps are also cleared in London, and the U.S. hasn’t restricted that market. Instead, authorities rely on registration to provide some level of oversight, Commodity Futures Trading Commission Chairman Timothy Massad said Tuesday in an interview.
Massad, who has spoken against restrictions on the location of clearing, said that he could still appreciate the EU’s desire to have oversight of clearinghouses in London that are crucial for euro-denominated products and the entire European economy.
Draghi also said the ECB must “carefully” analyze Deutsche Boerse AG’s takeover of LSE, which would create the region’s biggest exchange operator. Deutsche Boerse’s Eurex unit, for example, is licensed as a bank.
“When a merger leads to a change in ownership of a euro-area bank, as could be the case for entities within Deutsche Boerse and LSE Group that are licensed as banks, the ECB has to analyze it carefully from a prudential perspective,” Draghi said.
The EU’s executive arm, the European Commission, is already weighing whether the LSE-Deutsche Boerse tie-up would damage competition. Beres, a French member of the European Parliament, in November said it needs to go further. The deal should be considered by the full commission, not just its competition arm, she said.
A Deutsche Boerse spokeswoman said the firm is in constructive dialogue with the commission.
General Brexit news:
Sky News
By Mark Kleinman
9 January 2017
Continued access to Europe’s single market after the UK leaves the European Union (EU) must be preserved under a priority deal for the financial services sector, according to a report commissioned by scores of leading City firms.
Sky News has obtained the final draft of a report by the International Regulatory Strategy Group (IRSG) – a financial and professional services industry body – which warns that a departure from the EU’s passporting regime would be fraught with risk for London’s status as a global financial centre.
The report would appear to put the City at odds with Theresa May, the Prime Minister, who told Sky News’ Sophy Ridge on Sunday that Britain would not be able to pick elements of single market membership which suited it.
“Often people talk in terms as if we are leaving the EU but we still want to keep bits of membership of the EU,” she said.
“We’re leaving, we’re coming out.”
Titled ‘The EU’s third country regimes and alternatives to passporting’, the 172-page document produced by law firm Hogan Lovells and TheCityUK lobbying group, contains detailed analysis of the options available to the City once the Brexit process is concluded.
It argues that avoiding the imposition of new barriers between the UK and EU is essential.
“Failure to do so would reduce stability, and hinder markets in their role of channelling savings into investment and of creating jobs and growth,” according to the draft document.
It warns that the City would be hamstrung by a lack of definition of ‘equivalence’, which would enable firms to trade across EU borders roughly as they do now.
It also flags “serious concerns regarding the processes around [Third Country Regimes]”, including their unpredictability, the absence of a right to appeal against a determination of non-equivalence, and the ability of the EU to vary or withdraw such designations “at little or no notice”.
Sources said the report’s significance would partly reside in the fact that the IRSG is chaired by Mark Hoban, the former Treasury minister, with executive board members including executives from Allianz Global Investors, Aviva, Citi,  Deloitte, Fidelity, JP Morgan, the London Stock Exchange, Prudential and Standard Chartered.
Among the alternatives for UK-based firms wishing to conduct regulated activities in EU member states where neither passporting nor TCR arrangements were available, the report outlines three options: considering “whether national laws permitted it to carry on such business without a licence…[although] there are no general exemptions across the EU”.
They could also establish an EU-based subsidiary and apply for it to be authorised by the local regulator, although this method of operation if “generally considered to be inefficient”.
The last option is for a UK firm to apply to local regulators for authorisation in that member state through a branch rather than a subsidiary, but this too is “not a universal solution”.
The IRSG report concludes that third country regimes “do not provide a long-term, sustainable solution for the UK-based industry as a whole to access EU markets”.
It also urges ministers to conclude transition arrangements with the EU “as quickly as possible in order to maintain maintaining continuity of service provision by UK and EU firms until a negotiated settlement can be implemented”.
The document is likely to provoke a stark reaction both in Whitehall and the boardrooms of major City employers which are urgently seeking guidance about the shape of a future trading relationship between the UK and EU.
Dozens of firms, including Citi, HSBC, JP Morgan and M&G Investments, have raised the prospect that thousands of jobs will either move to other EU jurisdictions or be axed altogether without a guarantee of service continuity for clients.
The IRSG’s conclusions are the latest in a string of documents produced by key City stakeholders since the Brexit vote, with organisations such as the British Bankers’ Association and TheCityUK, two lobbying groups, highlighting potential risks to the financial and professional services sectors from limits on migration and significant trading restrictions.
Barney Reynolds, a partner at the law firm Shearman & Sterling, has argued the opposite case, suggesting that adopting an ‘enhanced equivalence’ model would liberate the City and enable it “to move to better, more targeted regulation”.
Sources said the IRSG report was due to be discussed with regulators and Whitehall officials later this week.
Financial Times
By Stanislas Yassukovich
11 January 2017

There is confusion over the fate of the UK service economy after Brexit, particularly where the City of London is concerned. Misunderstandings threaten a proper discussion and, worse still, run the risk of wasting diplomatic capital in the Brexit negotiations.

Commentators and even Treasury officials keep repeating the mantra that “the City must have access to the single market”. But there is effectively no single market in services in the EU, and certainly not in financial services. For example, a qualified German hairdresser must requalify to practice in France (and there are two different qualifications, domicile and shop), and an English solicitor cannot provide conveyance for a residential property sale in most EU countries.
As there is no banking union, no unified capital market and no European stock exchange, the regulation of financial services, focused largely on investor protection, is at national not EU level. Every industrialised nation, including the US, has investor protection legislation which requires overseas providers to undergo some form of registration and authorisation. And these requirements are exempted from the restrictions on non-tariff barriers in the General Agreement on Trade in Services.
The concept of “passporting” was designed to allow a financial institution authorised in one EU member state to apply for passports to market financial products in other member states without the need of further authorisation. It is open to firms in non-member states to establish a presence in one EU state and apply for passports from there. Luxembourg tends to be the location of choice for obvious tax reasons. After Brexit, UK firms, which have shown little interest in penetrating retail markets on the continent, will remain free to set up subsidiaries in the EU to acquire relevant passports.
In the absence of a single market, strongly resisted by EU members highly protective of their own regulatory regimes (including the UK), an attempt was made to introduce a single standard for retail products, resulting in the Markets in Financial Instruments Directive, roundly ignored by France and other EU countries, but strictly observed by the UK. It was hoped the passport system would introduce competition within the EU. But this has not happened and the core retail financial activities — residential mortgages, deposit and savings products and so on — remain almost entirely national, and highly protected.
So the concern about “access” must refer to the City’s wholesale business, by far the most important component of its position as the world’s premier financial centre. But wholesale financial services are purchased at source by professional clients, even those who do not maintain a presence themselves in the City, as so many do. EU institutions also buy wholesale services in the other financial centres of the world, such as New York, Dubai, Hong Kong and Tokyo.
There is no passport requirement to have orders executed on the City’s exchanges, any more than for orders on those in New York, Chicago or Tokyo. The world’s banks do not need a passport to access London’s interbank market, which is global, or to buy or sell foreign currency, or to participate in capital market syndicates. Nor do companies need one to buy reinsurance at Lloyd’s, engage corporate finance and M&A advisers or procure a host of other City services delivered at source.
So now a new threat is perceived by Brexit sceptics: that the EU may deny its institutions access to the City. Although, the EU cuts itself off from the world in many ways, it has yet to ban its citizens from contracting services outside its borders. Its institutions have been buying financial services freely from New York, Chicago, Dubai, Hong Kong, Tokyo and elsewhere. The EU and the eurozone are not likely to introduce discriminatory exchange controls, cutting themselves off from the financial world.
The controversy over the settlement and clearing of euro-denominated instruments has been around for some time. But in order to enforce a move of this facility to the eurozone, restrictions would have to be placed on eurozone banks in dealings with non-eurozone counterparties, eroding the currency’s convertibility. In any case the trading would stay in London, because that is where the liquidity and supporting services are located. It must be remembered than when Eurobond trading concentrated in London in the early 1960s, clearing was through Euroclear in Brussels and Cedel in Luxembourg.
Access to the EU single market in financial services is not an issue — simply because, effectively, there isn’t one. As it did when the UK did not adopt the euro, the City should just get on with business as usual.
By Ben Martin
12 January 2017
The City has ratcheted up the pressure on the Government by issuing a series of demands that banks and other financial firms want from a Brexit deal with Brussels, including a transition period to stop markets from falling into a tailspin.
An influential lobby group chaired by veteran banker John McFarlane, the chairman of Barclays, has published a list of what it calls “key priorities” for ministers to consider in looming negotiations with the EU over the UK’s future relationship with Europe.
The list from TheCityUK includes calls to “maximise access to EU markets”, a two-stage transition arrangement, and a plea to allow the clearing of euro-denominated derivatives – a £470bn-a-day industry- to stay in the UK.
“There is no question that getting Brexit right is a once-in-a-generation challenge,” said Miles Celic, TheCityUK’s chief executive. “Ultimately, the best Brexit deal will be one that reduces uncertainty and enables businesses to continue to best serve customers and clients.”
Under Article 50 of the Treaty of Lisbon, which Prime Minister Theresa May plans to trigger by the end of March, London has just two years to thrash out a deal with Brussels.
Banks, asset managers, and insurers are concerned that once the two years is up, firms and markets will fall off a “cliff edge” because either financial regulations will have abruptly changed or the new rules will have not been decided.
To avert the potential chaos, the CityUK wants an agreement on a staged transition to be struck at the start of Article 50. This would involve an initial “bridging period” spanning the UK’s exit to the ratification of the country’s deal with the EU, and then an “adaption period” that would allow companies to adjust to the new rules.
There are fears London’s status as a global financial hub will be damaged by the UK’s secession from Europe, especially in the event of a so-called “hard Brexit” that would result in the country leaving the EU’s single market.
Some international banks that have based their European operations in London are already considering shifting thousands of jobs to Paris, Dublin, Frankfurt and elsewhere in the EU to preserve their access to the single market.
But TheCityUK said that companies should “have access to the widest possible range of financial and related professional products and services without the need to establish a commercial presence” in both Britain and the EU. It is also pushing for rules that would not restrict UK-based firms from continuing to hire talented EU nationals.
The Government has so far been tight-lipped about the type of deal it will seek and the uncertainty has caused considerable unease in the Square Mile and Canary Wharf.
Earlier this week, Douglas Flint, the chairman of HSBC, and Xavier Rolet, the chief executive of the London Stock Exchange, warned MPs on the Commons Treasury Select Committee that some firms will start to implement Brexit contingency plans as soon as Article 50 is activated, if the Government has not given companies any guidance on what it plans to negotiate with Brussels.
Mr Rolet estimated that as many as 232,000 British jobs could be at risk if the clearing industry is lost to Europe or New York, much higher than the tens of thousands of job losses that many thought Brexit might entail. HSBC itself has previously warned it could shift 1,000 roles to Paris.
By Joe Watts
9 January 2017
Theresa May has blamed the media for misrepresenting her words on Brexit leading to a slump in the pound.
Sterling dropped more than one per cent against the dollar and euro following stories that the Prime Minister is planning a hard Brexit which tears the UK out of the EU’s single market.
Asked whether the money markets were “getting it wrong” in reacting negatively to her approach, she said: “I am tempted to say that the people who are getting it wrong are those who print things saying I’m talking about a hard Brexit, [or] it is absolutely inevitable it is a hard Brexit.
“I don’t accept the terms soft and hard Brexit.”
She added: “What we are doing is going to get an ambitious, good and best possible deal for the United Kingdom in terms of trading with and operating within the European single market.”
The outburst came after an interview with Sky News in which she repeated equivocal comments about her approach to Brexit, border controls and the single market.
Asked in the interview if she would prioritise immigration controls over single-market access, Ms May said: “We are leaving, we are coming out, we are not going to be a member of the EU any longer.
“We will have control of our borders, control of our laws, but we still want the best possible deal for UK companies to trade with and operate within the European Union and also European companies to trade with and operate within the UK.”
She then repeated similar comments she had made in December that people should not “think about this as somehow we’re coming out of membership but we want to keep bits of membership”.
Her words led some papers to report stories under headlines like “Goodbye to the Single Market” after which the pound dropped to $1.214 and to €1.153.
Asked later whether Ms May’s answers were not clear enough, a Downing Street spokesman later said: “This is going to be a complex negotiation and the Prime Minister is perfectly within her rights to approach these issues in the best way to get the best outcome for the UK.”
Ms May has refused to give much real detail of her negotiating position, since telling Tory conference last year that she would in March trigger Article 50 of the Lisbon Treaty, launching official Brexit talks.
Despite being under pressure to say more, she claims any sort of “running commentary” would undermine the UK’s position in negotiations.
She had originally wanted to invoke Article 50 under Royal Prerogative powers, but it looks likely she will be forced to give Parliament a chance to vote on triggering after losing a High Court challenge over the matter.
Ms May has promised to give a speech this month setting out more detail of her approach to Brexit.
13 January 2017
A “muddled” Brexit would cost London heavily in terms of jobs and investment, Sadiq Khan has warned.
The Mayor of London accused the government of having no clear strategy just two months ahead of a deadline to formally trigger the UK’s exit from the European Union (EU).
Mr Khan said a “muddled Brexit” would be as damaging as a “hard Brexit”.
The Department for Exiting the European Union has yet to respond to the mayor’s speech.
In his speech to business and political leaders on Thursday, night the Mr Khan said: “It’s deeply concerning that we still appear to have muddled thinking at the heart of government.
“The only thing that would be as damaging as a hard Brexit would be a muddled Brexit.
“And – unfortunately – it looks like that is where we are heading unless there’s a change in tact and direction from our government.”
The Mayor said a negative Brexit impact for London would hit the whole country.
“If the proper agreements aren’t negotiated and we don’t get the necessary transitional agreements in place, there’ll be serious knock-on impacts on our future – with jobs and billions of revenue lost,” he said.
“Revenues used to deliver public services and much, much more.
“This would hit the entire country, not just London.”
Downing Street has previously said the prime minister will give a speech next week “setting out more” on the government’s Brexit plans.
Theresa May’s official spokeswoman said: “She will be making a speech on Tuesday, setting out more on our approach to Brexit, as part of preparing for the negotiations and in line with our approach for global Britain and continuing to be an outward-looking nation.”
The Guardian
By Anushka Asthana and Heather Stewart
11 January 2017
Cabinet ministers have privately conceded that they are very likely to lose a landmark legal case on Brexit in the supreme court and have drawn up at least two versions of a bill that could be tabled after the ruling.
Sources have told the Guardian that senior government figures are convinced seven of the 11 judges will uphold the high court’s demand that Theresa May secure the consent of MPs and peers before triggering article 50.
It is understood that more than one possible bill has been prepared so that the ministers are ready to respond to any detailed guidance from the judges into what the legislation should look like.
It is not yet clear when the decision is likely, but the Guardian has been told that the government has asked the supreme court for early sight of the judgment, to allow “contingency planning”.
However, a spokesperson for the supreme court made clear on Wednesday that would not happen, saying: “It’s just too sensitive”.
Ministers hope the court will allow May to put together a short, three-line bill, or even just a motion, which is narrowly focused on article 50 itself and difficult for parliamentarians to amend.
However, Lady Hale – deputy president of the court – gave a lecture in November suggesting it was possible for the judges to go much further and demand a “comprehensive replacement” of the 1972 European Communities Act.
Dominic Raab, a Conservative MP and former minister who campaigned for Brexit, told the Guardian he and colleagues were not too worried about the case. “I hope we get some common sense from the supreme court, but I don’t expect the ruling to hold up triggering article 50, and the vast majority of people whichever way they voted now want us to get on and deliver Brexit,” he said.
However, some remain-supporting MPs and peers are hoping there will be an opportunity to amend legislation, for example to demand that the prime minister pursue the closest possible economic relationship with the EU.
The Liberal Democrats plan to lay down amendments demanding a Brexit deal be put to the public in a second referendum and that 16- and 17-year-olds get a vote.
Some pro-Brexit MPs have been urging the prime minister to adopt a “keep it simple strategy” – a phrase borrowed from management theory – ensuring any bill is as brief as possible, to minimise the risk it could be derailed.
Mark Harper, the former Tory chief whip who backed remain in the referendum, said he believed the supreme court would only be able to demand that the government either produce a motion or a bill, but not demand any level of detail beyond that. He suggested May’s government would probably try to publish “something very tight that gives authority to ministers to trigger article 50 before the end of March”.
Harper said that while it was not possible to avoid any amendments at all, a short and focused bill would make it difficult for MPs to cause trouble for May by constraining her room for manoeuvre during Brexit negotiations. He said that if he was still chief whip he would not be complacent about the process, but was “cautiously optimistic” that the legislation would be passed.
Any attempt by the government or the claimants to obtain advance notice of the supreme court decision has been stymied. In most cases it is normal practice for the lawyers involved to be sent the judgment on an embargoed basis beforehand.
In cases as sensitive as the article 50 appeal, the judgment is kept secret until the last moment to ensure that it does not leak out. A supreme court spokesperson said: “In view of the potential sensitivity of the case, there will be no copies of drafts available to anybody before the day of hand-down”.
Ministers are planning to move quickly after a judgment to avoid the days of speculation and anger that followed the high court ruling, which took the government by surprise. The first step is likely to be a statement to the House of Commons by the Brexit secretary, David Davis.
He is proving popular among MPs since taking up his role, with friends in the Conservative party planning a drinks reception this month to belatedly welcome him back to the frontbench. His ally Andrew Mitchell has joked that it is time for a celebration now it is clear that Davis, who stepped down as an MP in 2008, is not going to resign from this role.
One rumour circulating in Westminster is that the government plans to publish a press release claiming a win of sorts if four judges rule in favour of the government, while seven are against. That is the outcome that ministers believe is most likely.
And while they think they are likely to lose the case being brought by Gina Miller, which would require them to publish an act of parliament, they are more confident about other aspects. In particular, they do not think it is likely that the judges will order May to seek agreement from the Scottish and Welsh devolved administrations before starting the Brexit process.
The prime minister will give a speech setting out her approach later this month, and she will later publish a plan for Brexit after signing up to a motion put forward by the Labour party.
Moderate Conservative MPs had urged the government to table a formal white paper, setting out its priorities as it negotiates Brexit, including the answer to key questions such as whether May hopes to keep Britain in the single market or the customs union.
But they now expect May to publish a less definitive “menu of options” amid fears that a detailed white paper could constrain her room for manoeuvre in the coming months. “The government is still very concerned that if it puts forward a white paper, it will be subject to amendment,” said one backbencher.
Separately, the Scottish National party (SNP) is seeking to use the political crisis in Northern Ireland to ramp up the pressure on the government over its decision to table article 50 by the end of March. Northern Ireland, like Scotland, voted to remain in the EU, and the government has promised to take formal account of opinion in other parts of the UK through regular meetings of a joint ministerial committee as it enters talks.
Deirdre Brock, the SNP’s spokeswoman on Northern Ireland, challenged James Brokenshire on Monday. She asked the secretary of state for Northern Ireland: “Now that there is no effective administration at Stormont who can speak up for Northern Ireland in the joint ministerial committee, and remembering that Northern Ireland voted to remain, can he tell us what he is doing to ensure that the interests of the people of Northern Ireland are being looked after when Brexit negotiations are considered?”
15 January 2016
The UK may be forced to change its “economic model” if it is locked out of the single market after Brexit, Chancellor Philip Hammond has said.
Mr Hammond said the government would not “lie down” and would “do whatever we have to do” to remain competitive.
He had been asked by a German newspaper if the UK could become a “tax haven” by further lowering corporation tax.
Labour’s Jeremy Corbyn said his comments sounded like “a recipe for some kind of trade war with Europe”.
Having so far refused to offer a “running commentary” on her plans, Prime Minister Theresa May is expected to spell out the most detail so far of her Brexit strategy in a speech on Tuesday.
Reports have suggested she will signal pulling out of the EU single market and customs union, although Downing Street described this as “speculation”.
In an interview with the German newspaper Welt am Sonntag newspaper, Mr Hammond said he was “optimistic” a reciprocal deal on market access could be struck, and that he hoped the UK would “remain in the mainstream of European economic and social thinking”.
“But if we are forced to be something different, then we will have to become something different,” he said.
“If we have no access to the European market, if we are closed off, if Britain were to leave the European Union without an agreement on market access, then we could suffer from economic damage at least in the short-term.
“In this case, we could be forced to change our economic model and we will have to change our model to regain competitiveness. And you can be sure we will do whatever we have to do.
“The British people are not going to lie down and say, too bad, we’ve been wounded. We will change our model, and we will come back, and we will be competitively engaged.”
‘Extremely risky’
Asked about Mr Hammond’s comments during an interview on The Andrew Marr Show Mr Corbyn said “He appears to be making a sort of threat to EU community saying ‘well, if you don’t give us exactly what we want, we are going to become this sort of strange entity on shore of Europe where there’ll be very low levels of corporate taxation, and designed to undermine the effectiveness or otherwise of industry across Europe.’
“It seems to me a recipe for some kind of trade war with Europe in the future. That really isn’t a very sensible way forward.”
Mr Corbyn also said Mrs May “appears to be heading us in the direction of a sort of bargain basement economy”, adding: “It seems to me an extremely risky strategy.”
Scottish First Minister Nicola Sturgeon said it appeared Brexit would mean a “low-tax, deregulated race to the bottom”, with workers’ rights and environmental protections threatened.
She wrote on Twitter: “If that is the case, it raises a more fundamental question – not just are we in/out EU, but what kind of country do we want to be?”
In her speech on Tuesday, the prime minister is expected to call on the country to “put an end to the division” created by the EU referendum result.
She will urge the UK to leave behind words such as “Leaver and Remainer and all the accompanying insults and unite to make a success of Brexit and build a truly global Britain”.
Several of Sunday’s newspapers claim Mrs May will outline a “hard Brexit” approach, a term used to imply prioritising migration controls over single market access.
Northern Ireland Secretary James Brokenshire said he did not think it was a “binary choice” between trade and migration, but added that the “very stark message” from the EU referendum was that “free movement as it exists today cannot continue in to the future”.
Speaking on the BBC’s Sunday Politics, Liberal Democrat leader Tim Farron said a “hard Brexit” had not been on the ballot paper in June’s referendum and accused the PM of adopting “the Nigel Farage vision” of Brexit.
Mr Farage, the former UKIP leader, told Sky News he had “yet to be convinced” by the PM’s approach.
The Guardian
By Anushka Asthana
10 January 2017
Jeremy Corbyn will use his first speech of 2017 to claim that Britain can be better off outside the EU and insist that the Labour party has no principled objection to ending the free movement of European workers in the UK.
Setting out his party’s pitch on Brexit in the year that Theresa May will trigger article 50, the Labour leader will also reach for the language of leave campaigners by promising to deliver on a pledge to spend millions of pounds extra on the NHS every week.
He will say Labour’s priority in EU negotiations will remain full access to the European single market, but that his party wants “managed migration” and to repatriate powers from Brussels that would allow governments to intervene in struggling industries such as steel. Sources suggested that the economic demands were about tariff-free access to the single market, rather than membership that they argued did not exist.
Corbyn’s speech and planned media appearances represent the first example of a new anti-establishment drive designed by strategists to emphasise and spread his image as a leftwing populist to a new set of voters. They hope the revamp will help overturn poor poll ratings across the country, particularly with a looming byelection in Copeland, Cumbria.
Speaking in Peterborough, chosen because it is a marginal Tory seat that voted heavily in favour of Brexit, and which Labour is targeting, Corbyn will lay into May’s failure to reveal any Brexit planning, and say that Labour will not give the government a free pass in the negotiations.
After comparing the prime minister’s refusal to offer MPs a vote on the final Brexit deal to the behaviour of Henry VIII in a Guardian interview, Corbyn will say: “Not since the second world war has Britain’s ruling elite so recklessly put the country in such an exposed position without a plan.”
In a town that has experienced high rates of change in terms of migration, he will use his strongest language yet on the subject.
“Labour is not wedded to freedom of movement for EU citizens as a point of principle. But nor can we afford to lose full access to the European single market on which so many British businesses and jobs depend. Changes to the way migration rules operate from the EU will be part of the negotiations,” he will say.
“Labour supports fair rules and reasonably managed migration as part of the post-Brexit relationship with the EU.”
Corbyn will also say, however, that there will be no “false promises on immigration” and that his party will not echo the Conservatives by promising to bring the numbers down to the tens of thousands.
Instead, he will repeat an argument that action against the undercutting of pay and conditions, closing down labour loopholes and banning jobs being exclusively advertised abroad could bring down the amount of people travelling to the UK.
“That would have the effect of reducing numbers of EU migrant workers in the most deregulated sectors, regardless of the final Brexit deal,” he will say.
The speech comes as tensions grow within the Labour party as a number of high profile MPs, including the deputy leader, Tom Watson, and home affairs committee chair, Yvette Cooper, suggest that the party has to change its position on free movement.
This weekend two MPs – Emma Reynolds and Stephen Kinnock – suggested the time had come for a two-tier system under which highly skilled workers such as doctors could travel to Britain for confirmed jobs, while there would be quotas for lower-skilled workers. They argued that the EU referendum “was a vote for change on immigration”, an argument that May has also made.
Reynolds, who is a member of the select committee on leaving the EU, said she welcomed Corbyn’s commitment to managed migration but that the party had to understand what that meant.
Corbyn has been criticised from within the party for failing to talk about free movement reform, often stressing the positive impact of migration instead. Some MPs fear the position could cost the party votes across the north of England and the midlands where voters have been deserting Labour over the past decade.
Corbyn will also use his speech to try to contrast Labour and the Conservatives over the NHS after the British Red Cross said the health service was facing a humanitarian crisis.
“The Tory Brexiteers and their Ukip allies promised that Brexit would guarantee funding for the NHS to the tune of £350m a week. The pledge has already been ditched,” he will say, promising to end underfunding and privatisation.
“The British people voted to refinance the NHS, and we will deliver it.,” he will say. Sources would not say whether that would necessarily amount to a commitment of £350m a week.
As politicians and academics grapple to explain June’s Brexit vote, the party leader will provide his interpretation, arguing that it was about regaining control over the economy, democracy and people’s lives.
“We will push to maintain full access to the European single market to protect living standards and jobs,” he will say. “But we will also press to repatriate powers from Brussels for the British government to develop a genuine industrial strategy essential for the economy of the future.”
Corbyn has objected to EU state aid rules that prevent governments from intervening in industries such as steel. He also wants to make arguments about taking back control of the jobs market with collective bargaining agreements in key sectors and ending “the unscrupulous use of agency labour and bogus self-employment”.
By Siobhan Fenton
14 January 2017
Theresa May’s plans to trigger Article 50 could be delayed by months because enacting Brexit while Northern Ireland’s Assembly is in crisis may be illegal, The Independent has learned.
Power-sharing collapsed in the region earlier this week, meaning a snap election for Stormont is imminent.
An election is expected to last for at least two months, during which time the Northern Ireland Assembly will be unable to sit and approve decisions.
As a result, the Prime Minister may be unable to trigger Article 50 – the formal mechanism by which a country begins to leave the European Union – as she will be unable to get approval from Stormont, thereby delaying her Brexit plans even further.
Speaking to The Independent, leader of the anti-sectarianism Alliance Party, Naomi Long, said Ms May could face a legal challenge from Northern Irish politicians if she tries to trigger Article 50 while Stormont is not sitting.
She said: “Given the timing of this, what we’re going to have is an election taking place and talks [to form a new government at Stormont] taking place when any decision would need to be made by the Assembly [on Brexit].
“There won’t actually be an Assembly there to actually take votes. And that is one of the biggest challenges that we have in terms of the timing.
“I think unfortunately because the Assembly isn’t likely to be in place, to be able to take votes on the issue, we are in a very vulnerable and very weak position. Whether that means that Article 50 would have to be delayed, may at the end of the day be another case for the court to find out whether the absence of an administration here means that they need to consult with the devolved administration goes.”
Ms Long added that in the event of such a legal challenge, Article 50 could be delayed considerably while a court decides whether Stormont must approve plans.
“It could take months. We just don’t know, is the truth. As with so much around Brexit, it’s an uncertainty,” she said.
The Supreme Court is currently deciding whether the devolved administrations in Scotland, Wales and Northern Ireland should also be entitled to approve Ms May’s plans to trigger Article 50.
During the legal challenge which was heard in December, Northern Irish lawyers argued that in addition to MPs at Westminster getting a vote on whether to approve the plans, Northern Irish politicians at Stormont should also get to approve or deny the move. The justice are currently considering the case and their verdict is expected within the next week.
Power-sharing at Stormont collapsed on Monday after Sinn Fein politician Martin McGuinness resigned to protest at how his Democratic Unionist counterpart Arlene Foster handled allegations of a financial scandal.
Known locally as the “cash for ash scandal”, Ms Foster is accused of mishandling a government scheme started in 2012. The programme was designed to encourage local businesses to use renewable heat sources but a loophole meant they were actually paid to burn fuel pointlessly.
It is estimated the scheme will cost the tax payer some £490m. Ms Foster has denied any wrongdoing and resisted calls to stand down.
On Monday, Mr McGuinness resigned as Deputy First Minister, meaning Ms Foster also lost her position as First Minister under power-sharing rules which mean both must be in office for either of them to remain in power.
Secretary of State for Northern Ireland James Brokenshire now has until 5pm on Monday 16 January to convince Sinn Fein to nominate a replacement for Mr McGuinness in order to save the Executive. However, Sinn Fein has insisted they will not do so and an election now appears unavoidable.
An election is expected to be held within the next eight weeks, which would clash with Ms May’s plans to trigger Article 50 by the end of March. The possibility of a legal challenge by Northern Irish politicians to triggering the mechanism will be a further blow to the Prime Minister’s Brexit plans, amid criticisms that her Government’s attempts to enact EU withdrawal have been poorly executed.

Select Milano Monitor 08/01/2017

The Italian job: Milan hoping to clear up after Brexit

Financial News

By Lucy McNulty

6 January 2017

A group of Italian regulatory experts and entrepreneurs is promoting Milan as a eurozone hub for financial services, as it looks to step into the void created by the UK’s departure from the EU.
Select Milano, an independent, non-government organisation, is looking to pick up business that London could lose for regulatory reasons after Brexit. In its sights is the City’s lucrative clearing business, which processes around $570 billion of euro-denominated derivatives transactions daily.
Frankfurt and Paris will also be keen to compete for any business that could be up for grabs. Milan, Italy’s economic capital, is mounting a charm offensive, touting its established ties to the City – such as the London Stock Exchange Group’s ownership of the Milan stock exchange, Borsa Italiana.
Select Milano has been trying to build “a permanent bridge” between London and Milan since 2013, when then-British Prime Minister David Cameron promised to hold a referendum on the UK’s membership of the EU.
Bepi Pezzulli, a lawyer, is chairman of Select Milano. He previously managed treasury operations at the European Bank for Reconstruction and Development, and was formerly head of legal and compliance for investment manager BlackRock in Italy, Cyprus and Greece.
Pezzulli met with FN in London in December to discuss the group’s plans.
Financial News: Why did you launch this initiative?
Pezzulli: We set up Select Milano in 2013, when the [UK] prime minister announced he was calling a referendum.
We thought that once Brexit hits there [would] be an operation to steal business from the City, and Paris and Frankfurt would [lead that]. But breaking the economic unity of a City cluster isn’t good.
Rather than breaking the City cluster, we thought we should expand its perimeter to include Milan. [My] mission in life is to anglicise Milan. I think Italy has got an untapped potential in developing a better financial services industry, [and that] can help the country go back to its former glory.
So how do you plan to anglicise Milan? 
Our market infrastructure is already owned by the London Stock Exchange Group. But we’re also working to ensure Milan’s non-domiciled regime is equivalent to that in effect in Britain, so if you’re ultra-high net worth individuals you can ‘opt in’ a flat tax of €100,000 for 15 years.
We have approached the European Court of Arbitration to allow disputes to be governed by English law.
There’s a 50% tax break, too, that was approved in Italy’s 2017 financial services bill on December 7, so multinational executives from top banks relocating to Milan will get 50% of their salary tax free for five years. [After five years, the top tax rate is 43.6%.] The Tobin [or financial transaction] tax will lapse on the 31st December, 2016. And we’re working on reforming the capital gains tax to align it with England. [We’re looking to replicate] a small square mile right in the eurozone.
Who do you hope will benefit?
We’re trying to offer solutions to the City of London rather than to individual financial institutions. [We’re] targeting the clearing market because, with Brexit, this market will flow back into the eurozone. That’s going to be expensive and complex. But I think no more than 11,000 jobs will be lost as a result.
We think some of those jobs could transfer [to Milan], while some jobs will be just created locally.
On December 4, Italy voted to reject constitutional reform as part of a referendum proposed by its then-Prime Minister, Matteo Renzi. How will this affect institutions’ willingness to buy-in to Select Milano? Mature democracies come with constitutional steps. The same applies to England. It’s democracy. Markets know how to deal with it.
I’m [also] not sure how the constitutional referendum is relevant to the financial stability. So far, no Italian bank has gone bankrupt. There’s a bit of drama surrounding [Banca Monte dei Paschi di Siena], but it doesn’t really impose a threat to financial stability. I would be way more worried about the financial health of the German banks, nowadays… [By comparison,] Italy is in business.
What are the next steps?
Clearly, Brexit is a wake-up call and reforms are needed. I also don’t think that Brexit is going to be the catastrophe [for the UK] that many pundits foresee, because it may be also an opportunity for very pragmatic economic policies. We are competing against Paris and Frankfurt.
Paris has got a very high tax rate and its labour legislation is a nightmare. Frankfurt doesn’t really have an infrastructure, no international schools, no universities, no housing stock. [It is also] a real threat to the dominance of the City of London. Milan doesn’t threaten the City of London. It’s the second-largest industrial [city] in Europe, already clears €10 billion daily, has six universities, housing stock, industrial tissue, research and development, so the whole ecosystem is there.
The new government is business-friendly, is being well received by the markets [and] … the government backing of Milan’s global ambition continues, and [this initiative] is fully funded with €1.5 billion. If conditions allow, we’ll do a roadshow in London to ensure the City knows that the doors of the country are open.
What do you make of LSE CEO Xavier Rolet’s comments that New York would be the natural alternative to London for euro clearing, due to economies of scale and savings derived from clearing many currencies in one place?
If New York is such a logical location, why hasn’t it emerged as such before Brexit? The real driver isn’t economies of scale, but whether it is politically acceptable that such a strategic market be located out of the eurozone. We simply don’t believe that is likely to happen as Europe should regulate its own market infrastructure.
What do you think of the UK’s House of Lords’ view that moving euro-denominated clearing to the eurozone presents big risks to both the UK and EU economies?
It is entirely sensible that the right result would be clearing staying in London.  But we don’t believe that this will be allowed, as the [European Central Bank] needs to be in control of systemic risk within the eurozone. Given, therefore, clearing will leave, we believe that Select Milano’s approach – to use the LSE’s existing clearing infrastructure and ‘place’ the business in Milan – is both politically convenient and economically logical. The worst outcome for London is for clearing to move to a potential genuine competitor – Frankfurt.

Ventimila banchieri pronti a trasferirsi da Londra a Parigi entro l’estate

La Repubblica

3 January 2017

Summary from Italian:

  • Article discussing Paris’ efforts to attract post-Brexit business.
  • Europlace, the French lobbying group dedicated to attracting post-Brexit business to France, estimates that 20,000 financial workers could be preparing to move to Paris from London.
  • Paris is also potentially seeking a stake in the swaps market, though French financial regulation/labour laws are listed as deterrents.
  • Select Milano’s efforts to bring financial services (and specifically Euro clearing) to Milan are also briefly mentioned. It is noted that SM’s lobbying has been ongoing since June.

A Londra conviene che il mercato Euroclearing sia a Milano

Milano Finanza
By Bepi Pezzulli

24 December 2016

Summary from Italian:
  • The EU Commission has announced that regulatory changes are in the works which will likely cause the London Euro clearing market to be relocated elsewhere in the EU as the result of new geographic limits on the location of the liquidation phase and settlement of Euro-based transactions.
  • Despite forecasts by many that the market would move to New York instead of the EU, this is unlikely given impending changes to the Dodd-Frank Act in the US whose removal will likely result in US-based swaps not meeting EU legal requirements.
  • The threat of substantial deregulation and aggressive tax competition by the incoming Trump administration in the US will make it even more important for the EU to have its own clearing market.
  • It is in the UK’s national interest to resist the transfer of the Euro clearing market and instead make it a negotiating point with the EU in upcoming discussions; it should help to influence and coordinate the outcome of its transfer. Milan is the natural choice for this.
Corriere della Sera
2 January 2017
Summary from Italian:
  • Brief article detailing an interview with Filippo Barberis of the Milan City Council wherein he discusses the Council’s efforts to internationalise and bring greater autonomy to the city through a current draft resolution.
  • He asserted that the resolution seeks to promote the international position of Milan with respect to post-Brexit business flows, and then to work on becoming a good influence on European policies.

Milan and Brexit:

Brexit threatens 10 percent of London financial jobs: lobby group


By Huw Jones

21 December 2016

Up to 10 percent of jobs in London’s financial district may be lost if Britain fails to secure adequate access to European Union markets after Brexit, a City of London official said on Wednesday.
Bankers first called for full access after June’s vote to leave the European Union but such hopes have now faded, leaving the sector to call for a transitional deal to ensure a smooth switch to Britain’s new trading terms with the bloc.
Jeremy Browne, the City of London corporation’s special envoy for Europe, said about a tenth of jobs in the “Square Mile” financial district depend on the banks and other financial firms there having full access to the EU single market.
“We shouldn’t assume that all those will go en masse,” Browne told a briefing for the foreign press.
Some 164,000 people were employed in financial services in the City of London in 2015, according to the corporation’s website. Browne’s comment suggest that 16,400 jobs are at risk, lower than other estimates that lobby groups have put forward.
“Once you start pulling bits out, the overall organism could be affected in unpredictable ways,” Browne said.
Browne, a former Liberal Democrat lawmaker, has visited all EU states at least once this year to meet politicians, central bankers, businesses and regulators to spell out how an acrimonious Brexit would harm both sides.
Some people in Brussels and other European centers talk as if London’s financial district was entirely dependent on their benevolence, Browne said.
“I am not saying the EU is not significant, but there is a danger of them overstating their importance to the success of London, and therefore overplaying their hand in the negotiation,” Browne said.
London, as the only region in England that voted in June’s referendum to stay in the EU, must also realize that some people don’t like the capital’s international outlook and raw capitalism, Browne said.
Britain is set to begin formal divorce talks with Brussels by the end of March. Paris, Frankfurt, Dublin, Milan, Amsterdam and Madrid are already vying to attract financial firms from London.
“One of the problems the French have, is that it’s quite hard to make a pitch saying we want to be the home of financial services when you have spent 20 years making a virtue of being rhetorically hostile to financial services,” Browne said.

Brexit, Milano snobbata come alternativa a Londra

Wall Street Italia

By Daniele Chicca

21 December 2016

Summary from Italian:

  • Global Chairman of KPMG, John Viehmeyer, whose firm represents major global banks like Citigroup and Deutsche Bank, asserted that many of the world’s top financial institutions with operations in London are securing contingency plans for relocating post-Brexit.
  • He mentions that places like Frankfurt, Amsterdam and Paris are on the top of these banks’ lists for relocation.
  • The author notes that Milan is currently being snubbed in this conversation by the big banks, while places like Dublin and Madrid are being considered in addition to the aforementioned hubs.

Europe and Brexit:

Brexit: Paris could lure 20,000 finance jobs from Britain with moves starting within weeks


By Gavin Finch and John Detixhe

3 January 2017

Paris could lure as many as 20,000 workers from Britain’s finance industry with the exodus potentially starting within weeks as the UK begins its withdrawal from the European Union, according to Europlace, the French capital’s lobby group.
Paris will make its case to London-based executives in a series of February meetings as it competes for talent with rival cities such as Frankfurt. Europlace’s marketing materials show it will extol how Paris already employs more than 180,000 financiers, is home to the region’s biggest bond market and boasts the second-largest pool of asset managers.
The continental race to take advantage of Brexit is heating up as Prime Minister Theresa May plans to trigger the start of negotiations by the end of March. Global bank chiefs have warned Ms May that they will soon start shifting operations and jobs from the UK to elsewhere in the EU unless she can protect their easy access to its market.
“We feel decisions will be taken in the first semester of the new year,” Arnaud de Bresson, Europlace’s managing director, said in an interview in London. “We see institutions are accelerating their process of thinking.”
With time at a premium, bankers say they want to establish new or expanded offices in the EU before the UK leaves, which is currently set for some time in 2019. Ms May says she wants to strike the best possible deal for banks, yet hasn’t detailed what she will seek and also declines to fully endorse the transitional phase industry wants to smooth the departure.
HSBC already said in the run-up to last year’s referendum that it planned to move as many as 1,000 employees to Paris from London if voters backed Brexit, while Citigroup is now considering relocating some of its London-based equity and interest-rate derivatives traders to Frankfurt. TheCityUK lobby group warns that almost 70,000 jobs are up for grabs.
Europlace will argue Paris is better placed than other aspirants for London’s crown. It touts the city as the top hub in continental Europe for interest-rate swaps trading with some $141bn (£115bn) of the derivatives changing hands in France every day. That compares with $1.18 trillion (£964bn) in the UK.
It will also promote itself as a city of requisite skills, contrasted with Frankfurt employing fewer than 100,000 people in finance and Dublin just 30,000. Another asset in its eyes is that French corporations are typically based in Paris, whereas German ones are sprayed around their country.
Although it hosts some of Europe’s biggest banks, including Societe Generale and BNP Paribas, France has nevertheless long lagged behind the UK and Germany as an international hub for banking.
The country is perceived as hostile to financial companies and ranks 29th in the Global Financial Centres Index, only one spot above Casablanca. Even its stock exchange, Euronext NV, is threatened by Deutsche Boerse AG’s planned takeover of London Stock Exchange Group, which would create Europe’s dominant market operator.
France’s tight labour laws have also put off bankers who value longer work weeks and an employment regime that allows easy hiring and firing. De Bresson said Europlace is pushing lawmakers to relax such curbs.
Financial Times
By Jonathan Ford
18 December 2016
Much of the campaign unleashed by the City of London over Brexit has focused on the possible costs to Britain and itself of the UK’s departure from the EU. Precious little has addressed the wider costs to Europe of breaking up the continent’s financial hub.
Prominent City voices have been quick to issue stark warnings about the mass job losses in finance that might be expected should Britain leave the single market without a deal to preserve existing “passporting” arrangements. The Square Mile’s lobbying clearing house, TheCityUK, has talked of a “hard Brexit” costing up to 50 per cent of EU related revenue, with concomitant falls in the tax take.
But the biggest risk of all is arguably not to the narrow fortunes of a few City-based financial businesses, even if resulting changes force cuts in dividends they pass on to investors. It is the cost that post-Brexit policies may load on to consumers and businesses in the form of more expensive financial services. That affects not just banks and Britons, but savers and businesses across the bloc.
Some frictional costs may, of course, be inevitable, as new restrictions are placed on what business can be transacted cross-border. The worry is that this process will not be minimised. Out of some desire to punish Britain, or perhaps a hope that their own financial centres may benefit from fragmentation, the EU and its member states might pursue measures that serve little purpose other than to carve business out of the UK, even at a cost to the wider European economy.
There is a strong flavour of this urge in the EU’s apparent desire to reopen the idea of imposing territorial restrictions that would force the clearing of some euro-denominated securities to take place in the eurozone — an idea that Britain has long opposed and went to the European court successfully to stop a few years ago.
Such a move would, of course, directly and negatively affect the UK, as City-based institutions clear roughly three-quarters of the derivatives denominated in the euro.
But it is hard to see many benefits for the EU, or the wider European economy, were it to be imposed.
Applying a location policy would do little to achieve its ostensible purpose, which is to ensure the systemic resilience of Europe’s clearing infrastructure. Meanwhile, repatriation would raise costs for banks (and, ultimately, their customers) by fragmenting liquidity and making it harder to pool multicurrency swaps in one clearing pool as presently happens in London. The industry has estimated that these changes could force participants to put up an additional €77bn in margin just to back the same volume of trades.
There would not moreover be much of a pay-off for Europe’s aspiring financial centres in clearing trade. Some business might be transferred to the eurozone, shunted there mainly by EU banks, which, alone among the world’s financial institutions, the ECB could force to clear within its jurisdiction. But the point of the whole exercise would principally be political. It would — to employ the words of French president François Hollande — provide “an example to those who would seek the end of Europe”.
True, there is not an easy way to paper over these political cracks. The EU has never been wholly comfortable at the idea of Europe’s principal financial centre being located in a non-eurozone country, and its unease was only partially mollified by the City’s acceptance of ever more European oversight and rules. It is likely to be elevated to more neuralgic levels by Britain’s disruptive departure from the EU bloc. A co-operative deal may not be possible. Meanwhile, one that gave Brussels significant influence over a post-Brexit City would simply raise a host of old problems, such as whether the eurozone would gang together and impose unacceptable rules.
The City must understand that it cannot simply direct all its efforts in one direction.
Pointing out the negative consequences of Brexit to the UK government is only part of the picture. It must also seek to make common cause with those financial institutions and consumers of financial services in the EU and beyond who do not wish to see unnecessary costs and charges loaded on their shoulders as part of this process.
Brexit is not some zero sum exercise, but one that could have an effect akin to dropping a hefty drag anchor from the already labouring vessel that is the European economy.
Until the financial sector widens its analysis and starts to quantify these losses, its case for a post-Brexit settlement is only partially made.
By Jason Beattie
25 December 2016
Ireland has said it has received more than 100 inquiries from major firms looking to move from the UK because of Brexit .
Martin Shanahan, the chief executive of the Industrial Development Agency (IDA), said the bulk of the interest came from banks and financial institutions based in the City of London.
He told the Guardian newspaper that Dublin was looking to capitalise on Brexit by wooing firms with its low corporation tax rate and status as the only English speaking country in the EU after the UK leaves the trading bloc.
Theresa May has been warned of an exodus of major financial firms from London if she cannot guarantee “passporting rights” as part of our EU negotiations.
Passporting rights allow banks to sell financial products and trade across the EU under a single set of regulations.
A recent report by accountants PwC said up to 100,000 jobs in the UK financial services sector could be lost if the UK cannot strike a deal on passporting.
Mr Shanahan said Ireland’s 12.5% corporation tax rate and its common legal system with England made it an “attractive” base for companies looking to move their HQ after Brexit .
He said: “We have seen a huge increase in the amount of inquiries and activities across the globe.
“It’s not just our office in London, or our office in Dublin; we are receiving inquiries in Asia, in the US, in New York in particular.
“The figure that we have used to date is over 100 related inquiries.”
“For the financial services sector it is the fact that they need to have access to the European market and they need a jurisdiction in which they can do that.
“Ireland is extremely attractive because we are English speaking, have a common law system, there is the close proximity to the UK.”
By Tim Worstall
26 December 2016
So we are told at least, the agency in Ireland that attempts to attract inward investment is telling us that financial firms are looking at the UK post-Brexit and deciding that they’d like to explore relocation to Ireland. However, there’s a little less to this than there might seem. For quite clearly we are not going to have major financial institutions plonking themselves down in Dublin. The city isn’t large enough to encompass The City if you like. In fact, Ireland itself isn’t. What is happening rather is that some firms are exploring the opportunity to get around certain European Union laws, rather than entirely relocate:
Banks and more than 100 UK companies are inquiring about relocating to Ireland after Britain’s historic vote to leave the European Union (EU), a media report said.
Martin Shanahan, the Chief Executive of the Industrial Development Agency (IDA), on Sunday said many of the corporations looking to move were based in London, the Guardian reported.
The general view at The Guardian is that the British economy is much too dominated by finance so of course they should be delighted at this movement.
He told the Guardian newspaper that Dublin was looking to capitalise on Brexit by wooing firms with its low corporation tax rate and status as the only English speaking country in the EU after the UK leaves the trading bloc.
Theresa May has been warned of an exodus of major financial firms from London if she cannot guarantee “passporting rights” as part of our EU negotiations.
The important point here is those passporting rights.
Following Brexit, the UK’s authorised financial firms have been sending applications to relocate from London to Dublin.
The deputy governor of the Central Bank of Ireland has confirmed that several UK banks have started the application process.
“We’re seeing applications throughout the whole spectrum. We have applications for new business, the licensing of firms who are not present here but we also see very significant indications from regulated firms that are small today but want to be big tomorrow” Cyril Roux said.
To understand all of this, the essential scene setting. The European Union really is a Single Market. If you are legal to undertake some activity in one EU country then you’re good to go in all and any. That’s what those passporting rights are. It’s absolutely is not like selling, say, insurance in the US, where you need authorisation from each state you wish to sell in.
The Telegraph
By Ben Martin
3 January 2017
The boss of JP Morgan has warned the Wall Street giant could start to move jobs out of London faster than expected if the Government does not quickly agree a deal with the EU on a transition period to stabilise financial markets.
Banks, insurers and asset managers are pushing to maintain access to the EU’s single market for several years beyond the end of the two years the UK has to negotiate an exit with Brussels.
If the City does not agree a handover period, there are fears financial markets will be plunged into turmoil once Brexit comes into force and firms potentially lose their so-called passporting rights, which allow them to sell their services across Europe.
US giant JP Morgan has approximately 16,000 staff in the UK and has previously warned it could move about 4,000 employees out of the country to cope with Britain’s secession from Europe.
Boss Jamie Dimon has now told Financial News that although he wished “we could keep it all here” in London, the bank was now bracing for a host of scenarios, including shifting 4,000 workers.
“We’ve been planning for a range of outcomes because it’s still as uncertain as a couple of months ago,” he said. “What we know now is that this will be a slow process, and all the staff moves would not happen at once but over a period of years.
“If there is not a clear transitional period decided early in the process, where passporting rules still apply for a few years after negotiations, then we’d likely have to accelerate our timetable in complying with new rules.”
Any transition period would come into force after the end of the two-year period the UK has to thrash out an exit deal. The two years start when Britain triggers Article 50, which prime minister Theresa May plans to do by the end of March.
It came as Indonesia announced it would drop JP Morgan from providing some financial services to its government, after analysts at the bank last year told investors that they should cut their exposure to bonds issued by the Southeast Asian nation.
Indonesia will now no longer use the American firm as a primary bond dealer or to handle some transfers of state revenues. The finance ministry took the decision after it disagreed with a research note JP Morgan analysts published in November, in which it warned the emerging market nation was especially vulnerable to movements in the bond markets in the wake of the US presidential election.
Paris, Frankfurt, Dublin and Luxembourg are all vying to attract firms away from London, currently the powerhouse for European finance, in the wake of the EU referendum in June. However, Mr Dimon argued “it’s very good for Europe” that London was its financial centre.
“I think the efficiencies of the financial markets here accrue to Europe, too, because they get all those efficiencies embedded in how products are priced,” he said.
The JP Morgan chief, one of the most respected bankers in the industry, also warned that his “biggest fear now” is that Brexit “causes the EU to fail down the road”. He said “there was a good reason for the European Union, for peace and for the economic prosperity from the common market”.
Mr Dimon was rumoured to be a leading candidate to become treasury secretary for US president-elect Donald Trump, a role that eventually went to former Goldman Sachs banker Steven Mnuchin. The JP Morgan boss has instead joined an economic advisory team to Mr Trump, which includes other Wall Street bosses such as BlackRock’s Larry Fink.
“He seems to like to get things done, which could be good news for US economic policy,” Mr Dimon said of the next US president, who takes charge of the world’s biggest economy on January 20.
“I joined his economic advisory team and just signed up to lead the business roundtable in DC. I think there is an opportunity to collaborate here, if we work across parties thoughtfully.”
Mr Trump has said he will roll back regulation to stimulate the US economy, although Mr Dimon said he did not believe “we should get rid of Dodd-Frank”, the wide-ranging Act that was introduced by President Obama to avoid another financial meltdown.
However, the JP Morgan chief added that “it’s true that over-regulation has been holding back growth, and big data will prove it one day”.
The Telegraph
By Allister Heath
6 January 2017
Paris, we keep being told, is trying to grab banking jobs from London. Its PRs recently told gullible journalists that the French capital would be able to grab 20,000 City jobs, and Paris keeps being named – along with Frankfurt, Dublin and Luxembourg – as one of the centres that will seize some of London’s business. To say that I’m deeply sceptical about Paris’s chances would be a huge understatement.
For a start, while I do think that some investment banks (as opposed to other financial firms) may have to locate some jobs in the eurozone after Brexit to be able to continue to operate fully in that market, I simply do not believe that the numbers will be as large as some fear. There will be a hit, which is to be regretted, but it won’t be catastrophic. But regardless of what actually happens to London, Paris is an exceptionally poor competitor in the race for talent and capital. There are many reasons why, but one devastating statistic sheds a lot of light on the problem. There are roughly 2.2m inhabitants in Paris, which is ‘Far from growing, the population of Paris is shrinking, an astonishing development’ defined very narrowly (the best comparison is central London as opposed to (Greater) London, or Manhattan as opposed to New York City). London’s population is booming, driven by an explosion in service sector jobs, and in a high-productivity knowledge economy, a growing population is a defining characteristic of a successful metropolis. More than ever, we are becoming urban animals, with centres emerging as winners take all in terms of jobs, employers seeking out the best labour markets and skilled staff flocking to enjoyable locations.
All of the London boroughs are struggling to cope with a surging population, with the exception of Kensington and Chelsea, which saw a slight drop between 2001-11; the question is whether we can build enough quality homes and whether the infrastructure can cope. Families and youngsters are being pushed further out, damaging the economy’s resilience and quality of life. Such are the costs of success and flawed policies, the downside of London’s incredible jobs boom and transformation into a global city.
Yet Paris is bucking the trend: its problem is the reverse of London’s. Far from growing, it is shrinking – an astonishing development. Its population fell by 0.6pc between 2009 and 2014; the slump was around 5pc in the first, second, fourth and eighth arrondissement, with hardly any of the others recording any growth. Of course, the population further out in the Metropolitan area and in the Ile de France region is still growing, but the point is that the decline of Paris itself is ominous. It shows that the French capital, at the very least, has a serious problem, and at worst that it cannot possibly be seen as a serious rival to expanding super-cities such as New York or London.
There are many reasons for Paris’s woes: poor transport, high levels of crime and disorder, high costs, crippling taxes, and an anti-business, anti-development Left-wing mayor. Yet the establishment blames technology and American capitalism in the form of Airbnb for supposedly chasing out residents. It’s nonsense, of course. Jamie Dimon, the boss of JP Morgan, was commendably blunt: he told François Hollande, the lame duck president, in October that France must loosen its tight labour laws, which make it difficult for banks to recruit and shed staff if it wants to compete.
That isn’t the only barrier, of course, but it is a massive one. So could anything change? Could France finally embrace capitalism after the election later this year? I doubt it. Public opinion is hard to gauge, but the favourite in the presidential elections, François Fillon, a man who genuinely wants to push through libertarian reforms, was on up to 28 percent of the first-round vote – down by between 7 and 8 points – according to a poll by Elabe for Les Echos. Marine Le Pen is also down slightly, though just remains in second place and thus set for the run-off. Emmanuel Macron, the centre-Left candidate, is catching up: he is at between 16 and 24 percent.
Barring a major terrorist attack or some other such development, Le Pen won’t win. But would Fillon or even Macron be able to change France? The latter is a reformer, but as a Blairite rather than a genuine free-market revolutionary, wouldn’t go far enough. Fillon has already backtracked on a key policy and would face total war from the public sector if he tried to genuinely transform France. That doesn’t mean that he wouldn’t try – but given the enormity of the task, the chances of him actually succeeding are small. No sensible bank worth its salt would want to make a massive bet on France in the circumstances.
The Local/AFP
21 December 2016
Spain said Tuesday it has set up a commission charged with drawing up incentives to attract London-based financial firms looking to relocate after Britain’s vote to leave the European Union.
The goal is to draw banks and other financial firms based in the City of London seeking a new home should Britain-based firms lose their right to sell financial services across Europe when the country quits the bloc, Economy Minister Luis de Guindos said.
“I think there won’t be a stampede but there will be relocations. Many financial firms based in London know that the risk of losing the financial passport is very high and they are making their plans,” de Guindos told a meeting with the foreign press.
The Spanish capital offers solid transport infrastructure, good quality of life, abundant office space, a low corporate tax rate of 25 percent and a competitive income tax rate for foreigners, he added.
“Madrid has good chances,” de Guindos said.
But the minister said Spain needs to boost “the means, availability and efficiency” of stock market regulator CNMV to attract City of London financial firms.
To do this the government has put together a task force comprising members of the Bank of Spain, CNMV and the economy ministry, he added.
Some 5,500 financial firms based in Britain use their right to sell financial services across the EU, making London a global financial hub.
Rivalry among leading European cities to attract businesses from London is intensifying since Britons voted in June in a referendum to leave the EU.
French officials have promoted Paris as a financial capital for Europe that could take over from London while Ireland’s foreign investment agency has written to businesses with offers to help them relocate to Dublin.
Amsterdam, Frankfurt and Berlin have also made overtures. To be competitive with these cities Madrid needs a sound regulatory framework, said Carlos Fernandez, a market analyst at XTB Broker.
“The rules for financial operations, customers, liquidity, all those aspects need to be clear,” he told AFP.
So far hedge funds and large investment funds have been absent from the Spanish market in part because of the lack of clarity, he added.
Business Insider
By James Cook
4 January 2017
France’s digital minister Axelle Lemaire is on a crusade at the moment, travelling around the world trying to encourage startups and established technology companies to relocate or expand to France.
Lemaire is in Las Vegas this week for CES, and she spoke last year at TechCrunch Disrupt London. Her appearance in London was especially interesting as a number of startups are considering moving out of the UK after the result of the EU referendum.
The tech world overwhelmingly supported remaining in the EU. One poll found that 87% of respondents who work in tech wanted to remain.
Business Insider interviewed Lemaire about the outcome of the EU referendum, and why she feels that France is the perfect place for technology companies.
This interview has been lightly edited for clarity.
Business Insider: How many British startups have made enquiries about moving to France?
Axelle Lemaire: Many companies have already been in touch although I think many more will come in the forthcoming months when the timetable for Brexit becomes clearer.
In any case, whether they plan to leave now or have yet to decide, I’ve noticed an increased interest in the French ecosystem from British fintech companies. Whatever happens with Brexit, many startups find and continue to find France an attractive place to do business. If and when the UK leaves the single market, British startups will want to keep open access to the EU market: They will either leave the UK or at least develop their activities on both sides of the channel.
Altogether, what strikes me is the renewed interest that international investors show for France, partly but not only linked to the uncertainties created by Brexit. While investments in British startups plummeted in 2016, amounts invested in French tech have soared, increasing by 71% in January through September in 2016. In the third quarter of 2016 alone, funding obtained by French startups reached €857 million (£729 million), double the amount invested in Germany and almost equaling the €919 million (£781 million) invested in the UK.
This attention surrounding French tech is not trivial. We’re now harvesting the fruit of our longterm efforts to create a business-friendly framework and to promote worldwide the quality and versatility of our startup ecosystems, especially with “La French tech” initiative.
BI: Is France changing any of its regulations around hiring and firing to make it easier for startups to exist?
AL: In the last years this government has been implementing many regulatory reforms to promote a business-friendly environment. New labour laws and fiscal regulations have significantly lowered the burden on businesses. In the 2017 budget, we’ve cut taxes for companies who employ staff in France, cut taxes on shares distributed by startups to their employees, and enabled business angels to make tax-free investments in French startups.
Our labour law reform, six months ago, gives more flexibility and legal security to firms while creating a new framework for a more effective and constructive relationship between work unions and companies’ management. In particular, the new law generalises the primacy of firms’ agreements over branch agreements. It also makes redundancies for economic reasons more straightforward.
BI: What does the French government view as its strengths and weaknesses in the tech scene compared to Germany?
AL: I am not very keen on these comparisons which I find counter-intuitive as ecosystems in the larger European countries like Germany and France are increasingly interconnected. EU tech companies face massive global competitors from Silicon Valley and China. Our goal should be to create real European champions and not to focus on a narrow competition between European states. I strongly believe the European Union can help a lot there by promoting a homogeneous and startup-friendly framework that could help European digital champions to become truly global.
BI: Many French VCs that I’ve talked to are conscious of previous decisions by the French government which were seen as being harmful to businesses (such as the Dailymotion saga). What would you say to entrepreneurs who have seen previous work by the French government and are worried about coming to the country?
AL: Have you heard of retinal persistence? Our eyes continue to see for a few nanoseconds an image that is not there anymore, which helps the brain to make sense of the flow of information it catches. Maybe that’s what’s happening to some entrepreneurs and VCs who have not yet grasped all the essential changes that have been happening in the French environment, and are seeing it as it used to be rather than as it is now!
Actually, it’s not the case for all of them! Many understand that today’s France is business-friendly. In the coming months, we will welcome 180 new entrepreneurs from abroad, who have applied for the special package called the “French Tech Ticket.” We created the “French Tech Ticket” specifically to facilitate entrepreneuralism. It includes a €45,000 (£38,000) grant, visa facilities, and a fast track for all administrative procedures. Consider this: In 2016, the number of foreign entrepreneurs who settled in France tripled the 2015 number. Interestingly, the first nationality among entrepreneurs selected through this program was … American!
I really think entrepreneurs stuck in the past should keep up with the times or they might miss great opportunities. By the way, I’m not alone in this view. Take John Chambers from Cisco for instance, who decided to double his investment in France this year, saying “France is the next big thing…”
BI: Station F is obviously a big boost for the French tech scene. How much participation is the French government having there?
AL: Station F will be the biggest startup incubator in the world with 30,000 square meters of space and will host no fewer than 1,000 startups. This private project is led by our successful entrepreneur Xavier Niel. It symbolises the maturity of our ecosystems and the will of our entrepreneurs to reinvest to support the ecosystem. It has full support from the French government. Our national deposit and consignment fund will have a minority shareholding in it.
BI: You spoke recently at TechCrunch Disrupt in London, and you’re now going to CES in Las Vegas. How do you see the division between working domestically to support French companies and doing international outreach? Is there a danger of spending too much time abroad?
AL: Startups think globally so as minister for digital affairs and innovation I do so to and strive to show the entire world how strong French tech is. That’s why I try to attend major events like TechCrunch Disrupt London or CES. But be assured I still spend most of my time working directly with the French innovative ecosystems in Paris and in our 13 French tech metropoles.
BI: Is there a danger of creating a single tech hub in Paris and ignoring the rest of the country? That’s something that the UK has struggled with — how is France avoiding that?
AL: I’m glad you asked this question. This is a very important issue to me. Since the start, we’ve conceived French tech as a network of versatile local ecosystems spread all around the country, rather than a Paris-only business. One of the first programs I launched was to support 13 French tech metropoles, which included cities with robust local innovative ecosystems throughout the country like Montpellier, Bordeaux, Grenoble, and Lille. Startups from all of these 13 “Métropoles” will actually attend CES this year. We want our entrepreneurs to know that they can create a startup and make it grow in the place where they come from.
We’ve been investing a lot in hardware too in order to make this vision a reality. In 2013 we launched a €20 billion (£17 billion) investment program to spread ultra-fast optic fiber internet broadband all around the country. It’s being rolled out now and by 2024 every city or village in France will be connected to high-speed internet.
BI: France has traditionally been seen as a hub for media companies and video games, but something that it isn’t known for as much is fintech. How is France suited to fintech companies?
AL: France is very well-positioned in the fintech market for several reasons. First, the size of the payment market, with around 65 million payment cards circulating in France. Second, some historical players in this field, like Gemalto or Ingenico, were founded in France. Third, our engineers are arguably the best in the world, a key point for this sector, particularly hungry for talents and technical competences. This is one of the reasons why blockchain technology is developing so rapidly in France with numerous applications, chiefly in the financial field.
A fourth key support mechanism for French fintech is smart regulation. A series of new laws have boosted the development of fintech in France. For instance, my government has allowed transactions of non-listed securities to rely on blockchain technology; the Digital Republic law that I led through Parliament set a threshold under which no authorisation is needed from the regulators to start a business in this field.
Last but not least, our regulatory authorities are well-known for being very meticulous, which results in quality authorisations that are valued everywhere in Europe. And they have set up a one-stop shop, which streamlines and speeds up authorisation procedures for those who want to settle in France, whether it is due or not to Brexit.
All this context enables fintech innovators to thrive in this ecosystem and to rapidly scale to a critical size.
BI: You’ve said multiple times that you don’t need to pay for buses with adverts in London (or anywhere else). You may not need that now, but would you consider that in the future if you felt your current outreach wasn’t having the impact you want?
AL: I have no reason to think this kind of communications trick will be necessary to shed light on the quality of the French innovative environment. As minister for digital affairs, I’ve been meeting lots of entrepreneurs and investors around the world. When it comes to where to put their money, they don’t rely on promotion but on facts. Is the fiscal and social environment business-friendly? Is the ecosystem dynamic and mature? Is it easy to find staff with excellent skills there? Just consider the latest investment rates in France, you’ll see we’ve been quite convincing … without having to resort to renting any buses.
BI: France has traditionally been seen as risk-averse in its approach to business. Is that changing now, do you think?
AL: Yes, it has really changed. I see it every day. According to a recent study, one in every three French people under 30 would like to create a startup within the next two years, and 52% of French people believe that startups can save the economy. More and more new graduates want to create a startup rather than work for a big firm. We were a country of engineers and we are becoming a country of entrepreneurs. I believe that La French Tech initiative played a great role in this cultural revolution.
BI: Is it correct that coding isn’t currently on the curriculum in France, but is an optional course in schools at a certain age? Isn’t that a barrier towards creating a new generation of tech works? How is the French school system geared towards technology?
AL: Things are changing fast as far as education is concerned. Now all French kids in all schools are taught to read, count, write, and code. The ministry for education launched a digital plan which is promoting the use of digital tools by both children and teachers from primary school to high school. It will still take time to bring the education community up to speed with the digital challenges but the journey has started for good.
In order to develop digital skills and fill the needs of our companies, we also created in 2016 the “Grande Ecole du Numérique” — one could translate it as the great digital college — which is a network of 255 labelled digital courses throughout France, open to everyone. Roughly 10,000 people fully trained in web development, graphic design etc. will have completed one of these courses by 2017.
The Guardian
By Jill Treanor and Lisa O’Carroll
3 January 2017
Brexit could have an impact on the City in the coming months as banks decide whether to implement contingency plans to ensure they retain access to the remaining 27 EU member states by moving business out of the UK.
Theresa May, the prime minister, intends to trigger article 50 – the formal process of exiting the EU – in March and some senior officials in the financial district argue that the rest of Europe could lose out if operations are shifted out of London.
The local authority for the financial district, the City of London Corporation, has urged May to arrange transition arrangements “as soon as possible” to allay concerns of businesses which were delaying investment decisions.
Andrew Gray, head of Brexit at the consultancy firm PricewaterhouseCoopers (PwC), which is advising several financial services institutions, said announcements could start in late February, when banks publish their preliminary results.
“A number of big banks are finalising plans for announcements they will make [this] year,” he said.
In the run-up to the 23 June referendum, banks warned about the consequences of a vote to leave the EU. US bank JP Morgan said it could move 4,000 of its 19,000 UK workforce. Its main offices are Canary Wharf, Bournemouth and Glasgow. Britain’s biggest bank, HSBC, said it might need to shift about 1,000 staff to existing operations in Paris.
A report for the lobby group CityUK by PwC, calculated that there could be 100,000 fewer jobs by 2020.
Banks may not be able to delay moving of some of their operations to the remaining EU member states – even if the government were to announce a transition period beyond the two years after triggering article 50 – because of the time it takes to get authorisation from regulators and installing new management teams.
The director of policy and strategy at CityUK, said businesses did not want to move. “There’s a real stickiness. People are here for a reason. It’s a good place to do business,’ Gary Campkin said.
“The important thing is to make sure we focus on ensuring decisions aren’t made too early or too quickly and that’s why stability is crucial.”
The Corporation of London has published data showing that financial and professional services firms employ more than 2.2 million people across the UK, not just in the City.
Campkin said: “The important thing is there is clear recognition from the UK and the EU 27 that transition arrangements, bridging arrangements, or an interim period are an important part of the process”.
This involves two arrangements: the first when article 50 is triggered to the point when the UK leaves the EU; the second covers the period from exit to allow businesses time to adapt to the new arrangements.
“This is a negotiation. It’s not just about what the UK wants. The EU 27 needs to think really carefully what’s at stake for them too … That means, whether EU corporates know it directly or not, that they will be getting benefit from access to London,” he said. New York or Singapore could benefit, he added.
Bank of England officials have warned there could be an impact on the wider EU. Sir Jon Cunliffe, deputy governor, has said economies across the EU could lose out and that operations may move to New York, rather than another financial centre in Europe.
Sam Woods, another deputy governor at the Bank, has said the regulator is being kept informed of contingency arrangements being drawn up by City firms.
Anthony Browne, chief executive of the British Bankers’ Association, said all EU member states had a mutual interest in ensuring the period between concluding the UK’s exit from the trade bloc and any new relationship did not result in disruption to businesses and customers.
“Including transitional arrangements in the UK’s withdrawal agreement under article 50 would avoid a cliff-edge moment and ensure an orderly transition post-Brexit,” he said.

General Brexit news:

Brexit: Will EU bodies be staying in London or going?


By Gavin Stamp

6 January 2017

It is not just the UK’s future in Europe at stake in the forthcoming Brexit negotiations. The EU also has a large footprint in the UK, which could be about to get a little smaller in the next few years.
There has been plenty of speculation about whether the UK will remain in the single market or the customs union, what will happen to EU subsidies for key industries such as farming and fishing and whether the UK will remain a part of valued EU-wide educational and scientific programmes such as Erasmus and Horizon.
All this will be subject to negotiation over the next couple of years.
But what about the future of EU agencies and other EU-funded bodies actually based in the UK? In their cases, there could be a much quicker shakedown.
Of the EU’s seven institutions, the European Commission is the one with a major organisational presence in the UK.
Its central London headquarters, based in the former Conservative Central Office building, co-ordinates its activity in the UK – while there are also offices in Edinburgh, Belfast and Cardiff.
Approximately 35 staff, who also represent the European Parliament, play an important role in reporting back to Brussels on political developments in the UK, explaining EU policies to the media, business and public and acting as the commission’s voice.
Will any of this be needed after Brexit? At first glance, it might seem unlikely, but the reality is that whatever happens, the UK and EU will retain a close relationship. The EU will remain the UK’s largest trading partner by some way – for the foreseeable future at least.
Bearing this in mind, it seems unthinkable that there will be no official links between two.
The EU has diplomatic missions in the US, China and many other major economies where their officials have full ambassadorial status, working alongside counterparts from leading EU nations. This is a model that could be adopted in the UK after Brexit.
But the future for the EU’s two UK-based agencies – among 40 powerful executive and regulatory bodies dotted across Europe – is much less certain.
The European Medicines Agency (EMA) and the European Banking Authority (EBA) are legal entities in their own right, set up to perform specific tasks under EU law.
Their staff are generally highly skilled, well-paid and prized elsewhere.
‘Bad things’
Responsible for evaluating applications to market new drugs, facilitating access to treatments and monitoring the safety of products, the EMA has been located in the UK since 1995.
But, following the UK’s vote to leave the European Union, countries including Sweden, Spain, Denmark and Ireland are among those reported to be keen on luring the organisation and its 890 staff to their shores.
Its executive director, Guido Rasi, told the Financial Times that the uncertainty surrounding its future after Brexit had led to “all the bad things you might expect” including increased turnover of staff and reduced interest in vacancies.
While the decision on whether to move could hinge on the deal negotiated by the UK, he suggested any upheaval would have an impact on Europe’s pharmaceutical and biotech sector, including British companies.
“If we are losing expertise, we have to focus on managerial things, HR issues,” he said.
“Of course our capacity and commitment to provide additional support to this community would be decreased and that would make a fragmented Europe in terms of pricing and enforcement.”
If the head of the EBA is to be believed, a decision on the banking regulator’s headquarters is already settled.
The week before June’s referendum, its chairman, Andrea Enria, told the German newspaper Welt am Sonntag that the regulator would move to another European capital in the event of a Leave vote.
Any such shift would have to be approved by all EU members – including the UK while it is still in the union – so it might conceivably not happen straight away.
The European Commission has said no decision, let alone discussion, about the future of its agencies will take place until official talks about Brexit begin – expected this Spring.
‘Soft Brexit’
But the fact one of the EBA’s principal goals is to create a single rulebook for financial institutions across the EU would seemingly make it hard for it to remain where it is.
Professor Rosa Lastra, Chair in International Financial and Monetary Law at Queen Mary University of London, says it is “a given” that the agency will have to find a new home.
“The only way to keep the EBA in London is for the UK to remain in the single market, via some form of soft Brexit, which appears to be opposed by the government,” she says.
June’s Leave vote has set off a veiled bidding war to host the EBA, with Paris, Frankfurt, Milan, Warsaw, Luxembourg and Stockholm all rumoured to be interested in attracting the regulator, set up in 2011 in the wake of the banking crisis.
Although the agency is relatively small by European standards, it is growing in size – its budget rose by 20% to £38m this year – and its loss could be keenly felt by the City.
“When it moves, the City will lose the opportunity to influence rule-making in the single market in financial services,” Prof Lastra, who has advised the House of Lords, among other British institutions, on financial regulation.
“Whether or not that will affect the City’s status as Europe’s pre-eminent financial centre – and one of the world’s – will depend on the negotiations once Article 50 is triggered and on the model of trading in financial services that finally gets adopted.”
One multinational organisation that is definitely staying put in London is the European Bank for Reconstruction and Development, created in 1991 to help former Communist nations of Central and Eastern Europe, the Baltics and the Caucuses build fledgling market economies and replace their ageing infrastructure.
Although the EBRD – which counts the EU and European Investment Bank among some of its largest shareholders – has increasingly chosen to locate staff in client countries, it says there has been no thought about moving its headquarters from London, either to the Continent or elsewhere.
“We are not an EU institution but an international organisation with more than 60 countries as shareholders which include, alongside the EU 28, the United States, Japan, Canada and many others,” said a spokesman.
“There is no discussion about relocating the bank outside of London post-Brexit.”
By Gavin Cordon
25 December 2016
Donald Trump’s new trade chief has urged Britain’s rivals to take advantage of the “God-given opportunity” of Brexit to take business away from the UK.
Wilbur Ross, the US commerce secretary designate, said Britain was facing a “period of confusion” following the vote to leave the EU and that it was “inevitable” there would be “relocations”.
The billionaire businessman will be responsible for negotiating a free trade deal with the UK and his reported comments will raise concerns the incoming US administration will seek to exploit Britain’s isolation following Brexit .
Mr Ross was reported by The Times to have made his comments to an audience of Cypriot financiers in the days following last June’s referendum vote – before he had been appointed to Mr Trump’s cabinet.
“I recommend that Cyprus should adopt and immediately announce even more liberal financial service policies than it already has so that it can try to take advantage of the inevitable relocations that will occur during the period of confusion,” he said.
He is said to have added that the UK’s withdrawal from the EU was a “God-given opportunity” for financial rivals of the City of London, naming Frankfurt and Dublin in particular.
Labour said his comments, should be a “salutary warning” that other countries were ready to take advantage of the UK’s vulnerability post- Brexit .
Shadow international trade secretary Barry Gardiner told The Times: “Wilbur Ross’s comments are a stark reminder that the trade deals Britain will agree in future will not depend on goodwill from our partners, but on their own shrewd political and economic calculations.
“Theresa May’s government has failed to articulate a coherent vision of what kind of economy Brexit Britain will be.
“This makes us weak and vulnerable in the eyes of others.”
By Zlata Rodionova
20 December 2016
UK-based banks could sue the European Union if the bloc does not grant them a transitional deal as part of Brexit negotiations, lawyers have warned.
Businesses, particularly within the financial services industry, have long pushed the government to go for a transitional arrangement.
A cross-party group of peers, last week, said Britain’s financial sector must be offered a “Brexit bridge” to prevent companies moving to rival locations such as New York, Dublin, Frankfurt or Paris.
However,  Linklaters, Freshfields and Cliffords, three of the UK’s largest law firms, said banks operating in Britain have a legitimate legal right to retaining passporting rights and continuing to operate across the EU after the UK leaves the bloc, in a new report published this week.
Banks could appeal to the European Court of Justice on the basis that they have a right to “legal certainty” of a stable regulatory environment, according to the document, citing the Vienna Convention on the Law of Treaties.
“EU law cites a number of different bases for requiring transitional arrangements,” the document said.
“A failure to do so could possibly create an entitlement for an affected EU firm to take action against the commission.”
Finance companies are pressing Britain and the EU to agree to a transition deal that would keep many of the current arrangements for up to five years to help cushion them from the effects of Brexit.
There is no indication yet that banks are considering using the law to challenge the EU. Other lawyers say it would have limited chances of succeeding.
However, the fact that banks and lawyers are exploring these options shows the work they are doing to find work arounds, mainly to buy time before they decide if they will move some operations from Britain to the continent.
Lloyd’s of London has become one of the first major City businesses to confirm it will move a part of its operations to the continent in reaction to the UK’s vote to leave the EU.
Meanwhile, Japanese banks, including Nomura and Daiwa Capital Markets, have told the Government they will begin moving operations to the EU within six months unless the Government can provide clarity on the UK’s access to the single market.
Business and banking leaders have offered further commitments to the UK post-Brexit, as it emerged that growth in British businesses has fallen to a four-year low.
Google executive Matt Brittin and Barclays chairman John McFarlane praised the UK’s expertise in technology and financial services respectively, saying this gave businesses a reason to stay here.
It comes as just 39pc of UK firms surveyed by the Chartered Management Institute said they experienced growth following June’s referendum, which was the lowest figure since 2012.
Of the 1,118 UK business managers surveyed, 65pc are now pessimistic about the UK’s economic prospects over the next 12-18 months, and 49pc expect Brexit will have a negative impact on growth over the next three to five years.
Around 35pc of bosses polled said they also “lack confidence in current UK leadership and management’s ability to capitalise on post-Brexit opportunities”.
However, Mr Brittin, who heads up Google’s business and operations in Europe, told the BBC Radio 4 Today programme that the company was looking to focus on “big trends” amid this uncertainty, such as more people getting access to the internet.
He added: “The UK is starting with a lead in this area, so a world leader in e-commerce. So for us, there’s great talent here in the UK.
“We announced an intention to create 3,000 more jobs here in a big new investment in our facilities here, but that’s only because the UK is so good at the internet that we can support companies here in that growth agenda.”
Mr McFarlane, meanwhile, said there were some services currently based in the City of London which would make sense for both Britain and the EU to stay here post-Brexit.
He said: “The City of London is here because of its competitive advantage and therefore that is the reason why people are here.”
He added that Barclays was increasingly focusing on the UK and US markets.
In the Chartered Management Institute survey, three-quarters of those polled said skill investment would be even more important after the UK left the EU, though 20pc said they did not receive the training and development needed to “perform their job effectively” this year.
But only 25pc were pessimistic about prospects for their own businesses, in line with levels recorded by the Chartered Management Institute over the past year, while 57pc were positive about their business’s performance in the year ahead.
Ann Francke, chief executive of the Chartered Management Institute, said: “In this climate of heightened political uncertainty and economic turbulence, the time is now to position Britain as a global leader in responsible capitalism, targeting essential issues like workplace ethics, inclusivity and executive pay to restore trust and transparency and improve productivity.”
Fund manager Helena Morrissey said Brexit could be a success.
She said: “I’m not complacent by any means, but I’m not worried. The City was successful long before the EU was created, and it has all the potential, particularly with our global outlook, our very innovative approach, obviously we have fantastic talent here, to be successful for decades if not centuries to come.
“We have had people before flexing their muscles, as it were, and saying they’re out of here and then realising, actually, London is the place to be and we have a huge amount going for us that would be incredibly difficult to replicate anywhere else.
“We do have to have a different mindset, I think. We do have to embrace the opportunities, we have to look forwards, not at what we might have lost, and I think that’s something that isn’t quite there yet.”
Rishi Khosla, co-founder and chief executive of challenger bank OakNorth, told the programme his company had tripled its loan book in the few months since the Brexit vote.
He added: “We think a part of that is actually a function of businesses not being able to get the speedy responses from the big banks, but even less timely responses from the major banks, and actually therefore looking at alternatives.”
City bosses to face MP grilling over Brexit claims
The Telegraph
By Ben Martin
8 January 2017
Three of the City’s most powerful figures face a grilling from MPs over suggestions banks and other financial services firms exaggerated the threat posed by Brexit.
Douglas Flint, chairman of HSBC, London Stock Exchange boss Xavier Rolet, and Elizabeth Corley, vice chairman asset manager Allianz Global Investors, will appear before the Treasury Select Committee (TSC) on Tuesday.
The influential panel of MPs has launched an inquiry into the future of Britain’s economic relationship with Europe once it leaves the EU. It is understood MPs’ will investigate whether City firms have embellished the likely impact of Brexit on the Square Mile, in an attempt to pressure the government into prioritising the financial services industry during negotiations with Brussels.
It comes after the chief economist of the Bank of England conceded last week that the warnings of an economic downturn forecasters sounded before the EU referendum had been a “Michael Fish” moment – the infamous episode in 1987 when the BBC weatherman said there would be no hurricane the night before the Great Storm.
Andy Haldane admitted that some of the bleakest Brexit forecasts might transpire to be “just scare stories” and that economics was now in “crisis”. Mr Rolet’s predictions have been among the most doom-laden.
In the run-up to the Referendum he told the Sunday Telegraph that Brexit would lead to ‘implosion’ of the continental bloc. In September, the stock exchange boss claimed that as many as 100,000 jobs across the country are at risk if exiting the EU results in the loss of the clearing industry from the UK.
The clearing of some £460bn of euro-denominated derivatives a-day is set to be one of the main financial battlegrounds in negotiations between London and Brussels. European cities such as Paris and Frankfurt are vying to takeover the industry, although Mr Rolet has suggested most clearing will move to New York after Brexit.
HSBC said it could move about 1,000 employees from London to Paris if the UK left the EU, although Mr Flint appeared to row back on that claim following the referendum, saying that such a move would be an “extreme” scenario.
One of the main worries of executives at banks, asset managers, and insurers with European operations based in the UK is that their firms will lose access to the EU’s single market once Britain leaves.
This would force firms to move employees onto the Continent so that they can keep selling services to European clients, bosses argue. As a result, many are pushing for a lengthy transition period to give the City time to iron-out the intricacies of Brexit.
Financial Times
By Gemma Tetlow
29 December 2016
Optimism among the UK’s largest businesses reached an 18-month high at the end of 2016, as concerns about the short-term effects of the Brexit vote and worries about the global economy receded.
A new survey of the chief financial officers of major UK businesses has found that on balance, CFOs were more optimistic about their companies’ prospects compared with three months earlier.
This is the first time since the second quarter of 2015 that the net balance has been more optimistic. However, two-thirds still believe that Brexit will have an adverse effect on the business environment in the longer term.
Despite some pre-referendum predictions to the contrary, the UK economy has continued to grow steadily since the Brexit referendum. Output increased 0.6 per cent in the third quarter and early indications of activity in the fourth quarter suggest the dominant services sector has continued to expand. However, much of this has been driven by consumer spending, while business confidence has recovered less quickly.
“Buoyed by a backdrop of continued UK growth, CFOs have become markedly more positive on the outlook for their businesses and enter 2017 in better spirits than at any time in the past 18 months,” said Ian Stewart, chief economist at Deloitte, the consultancy that carried out the survey.
In the fourth quarter, 27 per cent of respondents said they were more optimistic about prospects for their business than three months earlier, while 22 per cent were less optimistic — giving a net balance of +5. This compares with a net balance of -31 in the third quarter and -70 immediately after the referendum.
The immediate impact of the Brexit vote is not the only risk that has receded during recent months. At the start of 2016, businesses and commentators were also worried about prospects for the global economy. There was concern that loose monetary policy in the eurozone was failing to stimulate growth and that there was a risk of a US recession. There were also fears that weak growth and falling asset prices in China could lead to a sharp slowdown in the country while low commodity prices posed a risk to other emerging markets.
However, CFOs still report a very high level of uncertainty and defensive strategies are still a priority for 2017.
Almost nine in 10 CFOs said the level of financial and economic uncertainty facing their business was above normal, high or very high and only 21 per cent thought now was a good time to take risk on to their balance sheets, well below the level in 2014 and early 2015.
Nearly half of CFOs said reducing costs was a strong priority in the next year and two-fifths said increasing cash flow — another defensive strategy — was important. This compares with 36 per cent who said introducing new products or services or expanding into new markets were strong priorities. This was the top-ranked expansionary strategy.
“Risk appetite remains depressed and is well below average levels and corporates remain on a defensive footing,” said Mr Stewart. “Cost reduction and building up cash [are corporates’] top priorities.”
Although CFOs’ concerns about the near-term outlook have diminished, most still expect the Brexit vote to depress their spending or hiring during the next three years. Just over half said they expected to decrease discretionary spending, 39 per cent expected to reduce hiring, and 35 per cent expected to cut capital expenditure.
The survey featured responses from 119 FTSE 350 and other large private companies and was carried out between November 29 and December 12. The combined market capitalisation of the 81 listed companies that participated was £396.3bn.
By Zlata Rodionova
20 December 2016
Britain’s legal services sector has warned the industry could be at risk if the government fails to secure guarantees for it after the UK leaves the EU.
A report, produced by lobby group TheCityUK, said Britain’s legal sector, which contributed roughly £26bn to the economy in 2015 and employs around 370,000 people across the country, will suffer if it loses mutual enforcement rules – which requires EU member states to recognise and enforce UK law and vice versa.
The loss of these rights would make Britain a “less attractive” for international businesses to resolve legal dispute and draw up commercial contracts, the group argued.
TheCityUK also called for the principle of free movement of people to continue to make sure the legal sector would not only retain access to overseas talent after Brexit but also provide clarity on how laws and judgments can continue to operate cross-border in EU member states.
More than 200 foreign law firms operate in the UK and employ in excess of 10,000 people.
UK sector turnover is two-and-a-half times that of Germany and four times more than France, which are Britain’s two largest competitors in Europe.
Miles Celic, chief executive at TheCityUK, said: “The UK-based legal services sector is the leading global centre for the provision of international legal services and dispute resolution”
“It is vital that the key challenges and opportunities for the sector are addressed in the Brexit negotiations and that its competitiveness is maintained and enhanced.”
“The sector is working on these issues and providing that insight into Government, allowing Ministers to draw on the UK’s unique reserve of world-leading legal expertise”
“The best Brexit deal will be one which is mutually beneficial to the UK, the EU and globally and which allows for a clear and predictable shift from current business conditions to whatever new arrangement is agreed.”
City A.M.
By Stuart Pickford and Mark Compton
6 January 2017
The risk and uncertainty of Brexit has cast a shadow over parts of the City, with some worried that two of London’s great crowns – global litigation centre and global financial capital – will be threatened. But how much will London’s standing on the world stage change in these respects as a result of Brexit?

Of course uncertainty abounds, but there are several reasons to be optimistic that London will maintain its position as a leading centre for cross-border business disputes.

First, London is a truly international dispute centre, with the majority of Commercial Court litigants coming from overseas. Portland Communications recently reported that 66 per cent were from outside the UK, with the majority of those being non-EU parties.
There is no reason why Brexit should undermine the respect enjoyed by the English legal system or the reputation of its judiciary. The court process is well-understood and supported by a strong UK legal services sector, with substantial investment having been made in recent years to give the Commercial Court a home fitting its premium brand in global dispute resolution.
English commercial law will continue to be well-known for its emphasis on respecting rather than re-writing contracts, and for applying established principles while developing to keep pace with the world outside the courtroom.
But EU law does play an important part in cross-border litigation, in particular on how to determine which country’s laws apply, where cases should be heard and the critical issue of how judgments can be enforced in different member states.
The remaining member states will still generally be required by EU law to uphold a choice of English law. And legal industry bodies are at pains to ensure the government appreciates the practical advantages of the existing EU framework on reciprocal jurisdiction and enforcement, or at least of having something of similar effect. Whatever happens, it is likely that contracting parties will remain free to agree to litigate in England, with English judgments enforced across a large number of jurisdictions.
Even with today’s uncertainty, the pre-eminence of English law in cross-border contracts and the strength of our legal system still give London a firm foundation to remain one of the world’s international dispute centres.
So one crown may remain for London, but what about our financial status?
Passporting is obviously an issue and, although operating in the City without a full EU passport will impact many financial institutions’ operations, some may conclude that they will have a reasonable chance to continue to provide services into the EU even if the passport ceases to be available. This is because EU legislation permits institutions that are not located in the EEA to provide certain cross-border services to customers without needing local licences if that institution is regulated in a jurisdiction with laws that are “equivalent” to those of the EU. The UK is on target to implement all applicable EU financial services legislation by the time we leave, so the UK’s laws should not only be equivalent but essentially identical to those of the EU.
However, “equivalence” is not a guaranteed right; it is at the gift of the EU Commission, so the granting of its status is likely to become political and cannot be relied upon.
The City will remain a significant global financial centre after Brexit because it will retain many functional, organisational, institutional and legal advantages over other alternatives and opportunities may be created, but Brexit and the loss of the EU passport will inevitably have an impact.
The City may not see a mass exodus the day after we leave the EU, but if Brexit means firms have to restructure, relocate or lay-off staff, transact through a longer chain of entities and lose the benefits of the concentration of clearing and liquidity, we could see incremental costs to capital raising, investment and hedging that together might damage the City and the wider economy.
Ultimately, even if negotiations with the EU result in a favourable outcome for the City, the threat of Brexit’s unknowns presents its own dangers. This is one of the reasons the City is pressing for an early agreement on transitional provisions to smooth the exit and possibly reduce the need for firms to react on the basis of insufficient information.
By Zlata Rodionova
19 December 2016
Britain’s hedge funds lobby groups are to lay out their wish list for Brexit negotiations, which will include access to EU investors and workers, in order to mitigate the damage a so-called hard Brexit could have on the City.
Hedge fund managers in the UK find themselves in an increasingly precarious position following Britain’s decision to leave the EU. A hard Brexit would result in the UK leaving Europe’s single market and therefore the loss of crucial passporting rights, which allow financial firms to sell their services freely across the rest of the EU.
The Alternative Investment Management Association (AIMA), Managed Funds Association and the Alternative Credit Council, which kept studiously quiet ahead of the EU referendum, will publish a document this week urging for those rights to be maintained, according to a draft document seen by the Financial Times.
Assuming the UK will leave the single market, the group will call on the Government to strike an equivalent agreement to maximise access to EU investors
According to AIMA figures, cited in the FT, about 85 per cent of European hedge fund assets are managed from the UK, and investment from Europe accounts for about a quarter of the money managed by UK firms.
Meanwhile, the industry contributes nearly £4bn annually in tax, while also providing more than 40,000 jobs across the UK.
Losing the ability to hire talent from the EU would also hit the industry as 20 per cent of its employees in London come from the EU.
A cross-party group of peers, in a new report published last week, said Britain’s financial sector must be offered a “Brexit bridge” to prevent companies moving to rival locations, such as New York, Dublin, Frankfurt or Paris.
The Lords also stressed the need for businesses to have access to highly-qualified staff and easily transfer them between the EU and the UK after Brexit.
For some companies, it might already be too late.
Lloyd’s of London has become one of the first major City businesses to confirm it will move a part of its operations to the continent next year in reaction to the UK’s vote to leave the EU.
3 January 2017
The UK’s ambassador to the EU, Sir Ivan Rogers, has resigned.
Sir Ivan, appointed to the job by David Cameron in 2013, had been expected to play a key role in Brexit talks expected to start within months.
The government said Sir Ivan had quit early so a successor could be in place before negotiations start.
Last month the BBC revealed he had privately told ministers a UK-EU trade deal might take 10 years to finalise, sparking criticism from some MPs.
Ministers have said a deal can be done within two years.
Labour said Sir Ivan’s departure was “deeply worrying” and Prime Minister Theresa May must be prepared to listen to “difficult truths” about the likely complexity of the Brexit process.
The diplomat was due to leave his post in November.
A government spokeswoman said: “Sir Ivan Rogers has resigned a few months early as UK permanent representative to the European Union.
“Sir Ivan has taken this decision now to enable a successor to be appointed before the UK invokes Article 50 by the end of March. We are grateful for his work and commitment over the last three years.”
Prime Minister Theresa May says she will trigger formal talks between the UK and the EU by the end of March, setting in place a two-year negotiation process.
Sir Ivan is a veteran civil servant whose previous roles include private secretary to ex-chancellor Ken Clarke, principal private secretary to ex-PM Tony Blair and Mr Cameron’s Europe adviser.
He was criticised in some quarters for “pessimism” over Brexit after his advice to ministers – which he said reflected what the 27 member states were saying – was reported.
Pro-EU figures raised concern about the impact of Sir Ivan’s departure, while Brexit campaigners welcomed his decision. Former Lib Dem leader Nick Clegg, who once worked for Sir Ivan in Brussels, described his resignation as a “body blow to the government’s Brexit plans”.
He added: “If the reports are true that he has been hounded out by hostile Brexiteers in government, it counts as a spectacular own goal.”
Labour MP Hilary Benn, who chairs the Brexit select committee, said it had come at a “crucial” point and urged the government to “get its skates on” in finding a replacement. “It couldn’t be a more difficult time to organise a handover,” he added.
Mr Benn told BBC Radio 4’s The World at One the permanent representative’s job was to convey the view of the UK to other member states, as well as “honestly and fearlessly reporting back” what those countries in turn said about the negotiations.
But former Conservative cabinet minister John Redwood said Sir Ivan had made a “very wise decision”, saying his leaked advice suggested he did “not really have his heart in” Brexit, believing it to be “very difficult and long-winded”.
He said the new ambassador should be someone “who thinks it’s straightforward”.
Former UKIP leader Nigel Farage said he welcomed Sir Ivan’s resignation, adding: “The Foreign Office needs a complete clear-out.”
But former chancellor George Osborne said Sir Ivan was a “perceptive, pragmatic and patriotic public servant” while the Treasury’s former top civil servant, Lord Macpherson – who is now a crossbench peer – said his departure marked a “wilful” and “total destruction” of EU expertise within Whitehall.
By Timothy Ross
19 December 2016
Scotland will hold a new referendum on separation from the UK unless it can stay in the European Union single market, Nicola Sturgeon will warn this week, adding to the pressure on Theresa May as the UK prime minister draws up plans for Brexit.
Scottish First Minister Sturgeon will detail proposals for a new arrangement with the UK to enable her country to remain inside the single market area after Brexit, even if the London government pulls England out. Voters in Scotland chose to stay in the EU in June’s referendum and now face being pulled out against their wishes by votes cast in England, she said in an commentary published in the Financial Times on Sunday.
“It remains my view, and that of the government I lead, that the best option for Scotland remains full membership of the EU as an independent member state,” Sturgeon said. “Independence must remain an option for safeguarding our European status, if it becomes clear that our interests cannot be protected in any other way.”
The ultimatum from Edinburgh on single-market membership will intensify the strain on May, who’s already battling to contain tensions within her own Conservative Party. On Sunday, Liam Fox, the International Trade Secretary, hinted that he was keen for a clean break from Brussels, while the former chancellor, George Osborne, warned that the UK should keep the closest possible ties to the bloc.
May has promised to listen to the governments of Scotland, Wales and Northern Ireland before taking an agreed UK-wide negotiation position to Brussels for formal talks, due to begin by the end of March.
Sturgeon said she wanted the UK as a whole to remain inside the single market, with tariff-free trade and freedom for banks to provide services across the 28-member bloc. “If the UK government opts not to remain in the single market, our position is that Scotland should still be supported to do so – not instead of, but in addition to, free trade across the UK.” she said.


A policy paper will outline how such a radical step could be achieved, including which powers would need to be devolved from London to Edinburgh, she said, warning that 80,000 jobs would be lost if Scotland left the single market. Such a solution will require “political goodwill and an openness to new ways of doing things,” Sturgeon said.
On Sunday, Fox warned that if the UK sought to remain part of the customs union – the EU’s tariff-sharing trade bloc – it would “limit” the country’s options for new trade deals. He told the BBC’s Andrew Marr Show that Turkey could provide a hybrid model for partial membership of the customs union, adding that the UK’s future relations to the group didn’t have to be “binary.”


In an interview on the same show, Osborne warned against ending tariff-free trade with Germany and France after Brexit. He said leaving the single market and the customs union would be the biggest act of protectionism in British history.
The Guardian
By Matthew Taylor
8 January 2017
Theresa May has denied the government’s approach to Brexit is muddled and indicated she will prioritise control of the UK’s borders over access to the single market.
The prime minister said the UK would be able to secure control over immigration after it left the EU and would then negotiate “the best possible trade deal” with the rest of Europe.
In her first broadcast interview of the new year, May said: “Often people talk in terms as if somehow we are leaving the EU but we still want to kind of keep bits of membership of the EU. We are leaving. We are coming out. We are not going to be a member of the EU any longer.”
Last week, the UK’s ambassador to the European Union, Sir Ivan Rogers, quit his post, urging his fellow British civil servants in Brussels to assert their independence by challenging “ill-founded arguments and muddled thinking”.
However, during an interview on Sky News, May rejected Rogers’ description of the government’s approach.
“Our thinking on this is not muddled at all,” she said. “Yes we have been taking our time … It was important for us to take our time and look at the issues.”
EU leaders have repeatedly said that the UK cannot have full access to the single market without agreeing to free movement of people.
Asked repeatedly whether she was prepared to sacrifice full access to the single market for control of the UK’s borders, May said it was not a “binary choice”.
“The question is what is the right relationship for the UK to have with the European Union when we are outside. We will be able to have control of our borders, control of our laws.
“This is what people were voting for on 23 June. But of course we still want the best possible deal for us, companies to be able to trade, UK companies to be able to trade in and operate within the European Union, and also European companies to be able to trade with the UK and operate within the UK.”
Financial Times
By Jim Pickard, Patrick Jenkins and George Parker
28 December 2016
London will remain the world’s leading financial centre in spite of Brexit, according to a senior City figure, in remarks that will boost Tory Eurosceptics who say lobbyists have exaggerated the threat.
Mark Boleat, policy chairman of the City of London Corporation, said there was considerable “nervousness” about a possible regulatory cliff-edge when Britain leaves the EU.
But he said: “I have no doubt that whatever happens in 2017, the City of London will remain the world’s leading financial centre.”
His comments reflect the view among pro-Brexit figures that the City will emerge with its global reputation intact, as lawyers devise ways to minimise the impact of leaving the EU.
Mr Boleat said it was vital that a transition deal was agreed early in negotiations to give the City enough time to adapt to a new regulatory regime; chancellor Philip Hammond is backing that cause.
“Firms’ nervousness can only be allayed if they know how they can continue running their business,” Mr Boleat said. “Important strategic business decisions are being delayed and much-needed investment postponed or withdrawn altogether.”
City UK, a lobby group, claimed in September that in certain conditions — with the UK denied “passport” access to European financial markets — there could be 70,000 job losses after Brexit.
But Steve Baker, a Tory MP co-chairman of Conservatives for Britain, said: “What I’m hearing is that there is no danger of London losing its status as Europe’s premier financial centre.”
John Redwood, a former Tory cabinet minister, said: “I think people are exaggerating the risks here. I don’t think the estimates of job losses are well based; I don’t think people can back them up — they are unduly pessimistic.”
Many of the predicted job losses revolve around fears that London could be stripped of clearing euro-denominated swaps in what is currently a multibillion pound market.
Mr Redwood admitted this had been a “major fear” in some quarters but said it was unlikely that Europe would strip both London and New York of the ability to handle such deals.
“If they want to be protectionist, they could say to banks under the ECB ‘you’re not allowed to clear euros in London or New York’ but they will be the losers because they won’t have access to some of the most liquid markets in London,” he said.
Gerard Lyons, former chief economics adviser to Boris Johnson at City Hall, said he was not convinced there would be net job losses. “Firms may have to make some changes but it would be wrong to talk about them moving huge amounts of stuff offshore.”
Lloyd’s of London, for example, may have to move part of its operations to the EU — but only with the loss of a few dozen jobs at the 328-year-old insurance market.
“I wouldn’t call it crying wolf, it just reflects the City not expecting a Leave vote and not being prepared. When you have been in the EU for so long the uncertainty does not help,” said Mr Lyons, who is now an adviser at the Policy Exchange think-tank.
One City adviser said banks still had the “nuclear option” of changing their domicile and depriving the exchequer of huge tax revenues. But he was not aware of any considering such a move.
Many of the big banks already have sufficient subsidiary operations in Frankfurt, Paris, Dublin or elsewhere in the EU, through which pan-European business could be rerouted. Most asset managers, likewise, have fund distribution arms in Luxembourg or Dublin.
Few financial services groups want to permanently change the way they operate before they have a better idea of whether it will be necessary. The government’s Brexit department and Treasury have asked City firms to communicate when they expect to take “irreversible decisions”. Banks say this equates to the point at which they would shift clients from a London-based entity to one in a rival EU financial centre.
US banks would face the most disruption from a “hard” Brexit, as they would have to reroute large volumes of business through European subsidiaries — a laborious process that they say would take far longer to implement than the two-year window for Brexit negotiations.
For some big US banks, the fallback plan is to continue with “back-to-back” transactions where a client is based and execute a mirror trade in London to reconcile the books in the British capital. Such an arrangement would be inefficient in the long term, but may be necessary if there is no transitional period.
Some Brexiters have raised the idea of “brass-plate” subsidiaries in an alternative EU hub — operations that would house few staff and merely act as conduit of business back to London.
But few believe this is a viable option, given the expectation that eurozone regulators would require real business to be transacted on the ground, with risk and control functions also appended locally.
3 January 2017
The London Stock Exchange said Tuesday it has agreed to offload the French arm of clearing house LCH to European rival Euronext as it seeks a merger with Deutsche Boerse.
LSE Group said a cash deal worth 510 million euros ($534 million) had been struck with Euronext, adding in a statement that the proposed sale “would be subject to review and approval by the European Commission in connection with the recommended merger of LSEG and Deutsche Boerse”.
LSE, which operates also the Milan stock exchange, had proposed the sale of the French division as an attempt to address EU competitions over a tie-up with the Frankfurt stock exchange.
Deep concerns over competition helped scupper two earlier attempts by the companies to merge, in 2000 and 2005.
Clearing houses are meanwhile an increasingly vital part of financial markets, insuring buyers and sellers against their counterparts pulling out of a deal in exchange for cash guarantees.
London hosts roughly 1.3 trillion euros of euro clearing transactions every year, a status that is now in danger with the British vote to leave the EU.
The LSE and Deutsche Boerse merger would create a financial markets behemoth competing with the likes of the Chicago exchange and ICE in the United States, as well as the Hong Kong stock exchange in Asia.
The planned merger, which has hit turbulence after last year’s shock decision by Britain to quit the European Union, would ring up one of the globe’s biggest groups for stock listings and market data, tying the Frankfurt-dominated eurozone to a post-Brexit London.
The proposed deal has drawn sharp rebukes from France, Belgium, Portugal and the Netherlands, fearful for their own stock exchanges, owned by Euronext.
Deutsche Boerse operates the Frankfurt exchange, as well as the Luxembourg-based clearing house Clearstream and the derivatives platform Eurex.
The Telegraph
By Tim Wallace
5 January 2017
Economic growth accelerated in the final month of 2016, as companies across Britain’s powerful services sector reported rising demand in December.
Growth in the sector rose to its highest level in 17 months, according to IHS Markit’s purchasing managers’ index (PMI), as companies recovered from the blow to confidence inflicted by the Brexit vote.
Businesses had feared the referendum result would harm the economy but, so far, there is little evidence of any widespread slowdown.
The services PMI rose to 56.2, up from 55.2 in November. Any score above 50 indicates rising business activity, while a score below 50 shows output falling.
In July the index dropped to 47.4, so December’s figure represents a major turnaround from the gloom of the summer.
The services industry makes up almost 80pc of the UK economy, and the positive figures follow healthy numbers for companies in the manufacturing and construction sectors, too.
“A buoyant service sector adds to signs that the UK economy continues to defy widely held expectations of a Brexit-driven slowdown,” said Chris Williamson, IHS Markit’s chief business economist.
“Collectively, the PMI surveys point to the economy growing by 0.5pc in the fourth quarter, with growth accelerating to a 17-month high at the year end.”
As a result companies are keen to keep on hiring, which may indicate that the halt in employment growth in the most recent official figures was a pause rather than an end to the recent spell of labour market growth.
One potential worry, however, is creeping inflation. Oil prices are rising and improved growth in countries such as China and the US is pushing up the cost of other commodities, while Britain also faces the prospect of higher import costs because the value of the pound has fallen.
Price pressures on services firms rose in December at the fastest pace for five years, the PMI survey found, threatening to push up prices for customers.
Food, fuel, IT and wage costs were all noted by companies as expenses that rose particularly sharply during the month.
“A moderation in growth in 2017 seems likely as rising inflation eats into households’ real income growth,” said Scott Bowman at Capital Economics.
“Nonetheless, the support provided to activity from a lower pound and rock-bottom interest rates should prevent growth from slowing too sharply. Overall, our forecast is for GDP growth to ease from around 2pc in 2016 to about 1.5pc in 2017.”

Select Milano Monitor 11/12/2016

Financial Times
By Patrick Jenkins
9 December 2016
David Davis: Engagement ring
The line of limos outside The Shard on Monday was pretty short. Among the 10 financial services representatives who came to the Warwick Business School outpost on the 17th floor, only John McFarlane, Barclays’ chairman, and Baroness Shriti Vadera, his opposite number at Santander UK, were head honchos. They were here for the first joint audience with chancellor Philip Hammond and Brexit minister David Davis.
The government has moved on from its initial interaction with Vadera’s elite chairmen’s committee (the snappily named Efscac, or European Financial Services Chairmen’s Advisory Committee). This time, Hammond and Davis wanted to get a more technical view — including from those who’d felt sidelined from Efscac. Even the pretty obscure QBE (not even a top 10 insurer in the London market) had a representative in the room.
It all passed off pretty smoothly with most of the session focused on contingency planning and transitional arrangements. Hammond and Davis had one big question: when will everyone make “irreversible decisions” about moving operations away from London? No one had an answer but there were mutterings about next June, hardly enough time for the government to start negotiating, let alone have an idea of what a deal might look like.
Davis is learning to read his audience when talking about the upsides of Brexit: a brief attempt to engage the room on the opportunities ahead was met with silence. He moved swiftly on.
Select Milan: Che fortuna
With comically bad timing, the head of Milan’s campaign to attract Brexit-hit financial firms flew into London this week just as Italy’s political and banking systems were thrown into chaos.
Bepi Pezzulli, a financial markets lawyer who chairs Select Milano, has been meeting City institutions to present his vision. He cites a “brain attraction law” offering foreign professionals a 50 per cent tax break for five years, an improved tax scheme for non-domiciled residents and a plan to scrap the financial transactions tax as all boosting Milan’s appeal.
Pezzulli, who once played football as a tricky winger for Lazio, says he also wants to build on the London Stock Exchange’s ownership of the Milan exchange to build a broader partnership between the two cities.
“Instead of stealing business, like Frankfurt or Paris, we’d like to establish Milan as an outpost of the City,” he says. But given the tumult back home, he’ll need more than fancy footwork to win this game.
Mark Carney: Festive fun
To the Bank of England, with the great and the good of the City and Westminster, for Christmas drinks hosted by the governor Mark “Carnage” Carney. He certainly lived up to that childhood nickname with a witty speech, replete with Yuletide bombs, riffing on a festive orgy (of consumerism) and featuring three wise men — Lord King (the last governor on a visit), Prince Charles (due to visit the following day) and Jacob Rees-Mogg (perhaps the next governor?).
A summary of the year’s events included key departures. Carney stressed he had not been among them. But Andrew Bailey, former deputy governor, was.
Bailey started in the summer as chief executive of City watchdog, the Financial Conduct Authority, “in a heroic act of self sacrifice”. Cue a pained groan from FCA chairman John Griffith-Jones. Then there was the readout of all the central bank’s speeches and papers over the 12 tumultuous months that have been 2016. “Which can all be summarised by one phrase,” Carney suggested. “We were right.”
Milano Finanza
By Bepi Pezzulli
10 December 2016
Summary from Italian:
  • A discussion of the consequences of Brexit on the financial services industry in London, noting , in particular, that the banking industry would be the centre of a key bilateral UK-EU agreement, and that Euro-clearing would be one of the significant prices to pay for Brexit.
  • Milan would be the ideal city to benefit from the departure of Euro-clearing activities from London, particularly taking into account the potential repeal of the Dodd-Frank regulatory framework in the US. Milan could offer London an already-functioning ecosystem for clearing activities, and would act in partnership rather than competition — something which sets it apart from destinations like Frankfurt.


Europe and Brexit:
By Zlata Rodionova
8 December 2016
Leading international UK-based banks are in advanced stages of planning to shift operations to Paris as London braces for the impact of Brexit, France’s chief financial regulator has said.
Paris is among a number of European cities seeking to woo firms considering a move away from London to maintain their access to EU markets, and faces competition from Dublin, Frankfurt and Luxembourg, among others.
Benoît de Juvigny, secretary general of Autorité des Marchés Financiers (AMF), said that “large international banks” have conducted due diligence – the process of close scrutiny that large companies go through prior to making a major deal – to move operations to the French capital.
“In some cases I would say we are still at the level of inquiries or informal inquires by consultants, by lawyers and so on,” Mr de Juvigny told the BBC.
“But in other cases, especially regarding large international banks, it’s a normal informal inquiry but they have been undertaking due diligence, and we are receiving lots of practical questions regarding the way they are going to be managed from our perspective, from their relationship with the French regulators.”
Mr de Juvigny added that “many other companies”, not just banks, had started to consider Paris as a base for their EU operations post-Brexit.
UK banks fear that a hard Brexit will result in the UK leaving Europe’s single market and therefore signal the loss of crucial passporting rights, which allow them to sell their services freely across the rest of the EU and give firms based in Europe unfettered access to Britain.
The loss of these rights could be devastating to the City of London as nearly 5,500 firms registered in the UK use passporting rights to operate in other countries.
Last week, Cyril Roux, the deputy governor of the Central Bank of Ireland, said several UK-based firms had started the application process to be authorised in Ireland.
Brexit Secretary David Davis said last week that the Government was potentially willing to pay the EU in return for the UK maintaining access to the single market.
It is the first time any minister has admitted Theresa May’s administration is open to the idea of paying Brussels to secure access to the trading bloc for British businesses and immediately led to a surge in the pound.
Last month, James Bardrick, the UK head of US bank Citi, said the main questions businesses had to answer was how quickly they needed to act on contingency plans aimed at protecting their businesses should the UK leave the single market.
By Patrick Donahue and Matthew Miller
6 December 2016
Frankfurt, Germany’s financial center and home to the European Central Bank, has good chances to edge out competitors such as Paris and Dublin in luring banking business from London after the Brexit vote, according to the regional state leader.
“We’re offering a lot, we’re consulting a lot,” Hesse state premier Volker Bouffier said in a Bloomberg Television interview on Tuesday. “I was just in New York with all the big American banks — we said: ‘Here you have a good location.’”
Bouffier, a member of Chancellor Angela Merkel’s Christian Democratic Union, said his state government is “very active” in pitching Germany’s fifth-largest city to potential newcomers that want to be inside the European Union once the U.K. leaves. “I think we have a big chance.”
The U.K.’s impending exit from the EU has cast a spotlight on potential locations that could win bank business should Brexit trigger an exodus from London. Financial firms’ so-called passporting rights that allow them to do business throughout the EU are a concern for the financial industry as the U.K. government approaches Brexit negotiations next year.
Banks’ need to have a strong presence within the 19-member euro-area would play to Frankfurt’s advantage, considering the presence of the ECB, the Bundesbank and BaFin, Germany’s financial regulator, Bouffier said. A strong economy and political stability would factor into decisions, too, he said.
“Paris is fascinating and Dublin is beautiful too,” Bouffier said during a CDU convention in Essen, Germany. “We have the biggest collection of competence, on experience and knowledge of what goes on in banking.”
International Business Times
By Kedar Grandhi
7 December 2016
British banking giant Standard Chartered is reportedly considering a European Union subsidiary to maintain its EU market presence post-Brexit. While Standard Chartered has no plans to shift its headquarters from London, the subsidiary would act as a legal base in the EU.
This would help the British bank continue its business operations in the EU even if the UK loses access to the single market in the Brexit negotiations. The company has shortlisted Ireland’s capital Dublin and Germany’s financial hub Frankfurt for the entity, Bloomberg reported.
A spokesman for Standard Chartered said: “Our focus is on ensuring market access for our clients, and we will maximise planning and preparedness while we observe developments over the next few months until Article 50 is triggered.”
The news comes just days after Philip Hammond and David Davis pledged a “smooth and orderly” Brexit transition. The UK Chancellor and Brexit minister made promise in a meeting with high-profile financial services chiefs on Monday (5 December).
The 90-minute meeting at the Warwick Business School in The Shard was attended by senior executives of 10 UK financial services companies. One of the topics discussed was the options that could be provided for these financial companies to retain access to the European single market post Brexit.
Both Hammond and Davis suggested that these companies could be given new passporting rights to operate across the bloc based on the principle of equivalence. While nothing is certain until the Brexit process is set in motion in 2019, many UK firms are afraid of losing their rights to provide services across the EU.
International Business Times
By Dan Cancian
8 December 2016
The world’s major lenders are unlikely to relocate away from London even once Britain leaves the European Union, as they would struggle to replace the infrastructure system currently available in the UK, experts have suggested.
Britain will not trigger Article 50 of the EU constitution, which would effectively rubber-stamp its intention to leave the bloc, until next year but the pressing concern for worldwide banks is to ensure they retain access to the European banking passport system.
This allows banks and other financial institutions authorised to operate in an EU country, or a state member of the European Economic Area (EEA), to conduct business across the union.
Panmure analyst David Buik, however, does not expect banks to be flee the UK anytime soon.
“It’s not arrogance, London is where it is,” he told IBTimes UK.
“Negotiations and trade-offs will be tough but not insurmountable. I accept the passport issue but where there’s a will there’s a way. Even [Bank of England Governor Mark] Carney said London cannot be replaced.”
On Wednesday (8 December), France’s top stock market regulator suggested leading banks were in advanced stages of planning to shift some of their operations from London to Paris amid fears over Brexit.
Benoit de Juvigny, secretary general of Autorite des Marches Financiers (AMF), told the BBC that “large international banks” based in London have conducted due diligence to move operations to the French capital.
Paris – a dream or a nightmare?
However, Paris might not be such an appealing destination for banks, due to a host of different reasons. “With Paris, language is an issue,” Buik added.
“With [Marine] Le Pen possibly a winner next April and the draconian tax system in France and very tough regulation, do people really think people will move en masse to Paris? In their dreams. Goldman Sachs, JP Morgan, Societe Generale and BNP Paribas may well send a few hundred as a contingency plan – so what – They will return to London!”
Speaking to this publication, Michael Collins, economist at the Institute of Directors admitted there was a “real risk” that different EU cities will attempt to poach banks’ operations from the UK, but stressed London has many things that would help offset this risk.
“London is home to one of the world’s largest pools of highly skilled, internationally-sourced labour, a convenient timezone, world-class infrastructure, the world’s business language, and some of the world’s best universities,” he said.
Along with the French capital, Frankfurt, Amsterdam, Luxembourg and Dublin have all emerged as possible destinations for London-based banks but analysts have warned it would be nigh on impossible to replicate London’s environment abroad, in terms of workforce and infrastructure.
“We should not forget either that the French labour code is thousands of pages long, German employment law is more suited to manufacturing rather than services,” Collins added.
Frankfurt – Germany’s finance hub, and home of the European Central Bank and Deutsche Boerse – has a world class transport network while its airport is a global aviation hub which serves a super-connector terminal for flights between the Americas and Asia.
Additionally, letting office space in Frankfurt would 10-15% cheaper per square foot compared to London, according to data provided by Knight Frank Estate Agents. The only problem is that Frankfurt is a provincial town, functional not chic, and in no way geared up to cope with a mass influx of bankers, or anyone else for that matter, looking to escape a Brexit-burdened London.
“Frankfurt is a Mickey Mouse town of 750,000 people with inadequate infrastructure,” Buik argued. “It would take them 10-years to build adequate infrastructure.”
Dublin faces a similar dilemma. Language, time zone and common law are the same over the Liffey as they are in London, while Ireland’s 12.5% corporate tax rate has also proved very appealing with international firms.
However, while the advantages might be obvious, Dublin also shares some very familiar problems with London, such as a chronic housing shortage.
“A shortage of housing and rising rents are two issues currently facing Dublin and require urgent attention from the government. Increased investment is also required in Dublin’s public transport,” Graeme McQueen of the Dublin Chamber of Commerce told IBTimes UK in July.
Collins also highlighted the issue, suggesting Dublin did not have the housing or transport infrastructure in place to absorb all of London’s potential fragmentation. However, he added the issue of banks leaving Britain would likely come up again as Theresa May and the government continue to negotiate the terms of Britain’s exit from the EU.
Financial Times
By Laura Noonan, Oliver Ralph and Vincent Boland
8 December 2016
Ireland’s hopes for a post-Brexit financial services boom are coming under threat from a skills shortage that could curb its central bank’s ability to keep up with a surge in licence applications.
Ireland’s finance minister Michael Noonan last week admitted the Central Bank of Ireland (CBI) — which he said wants to hire an extra 170 staff next year — is already struggling to compete with the private sector for the talent it needs and cannot put a timeline on how long it will take to deal with complex licence applications.
And insurance industry insiders said private companies were also already struggling to hire in some areas, a situation that will only get worse if the insurers that are considering moving their EU headquarters from London to Dublin go through with their plans.
As the only English-language speaking country in the EU, and already home to a sizeable international financial services centre, Ireland has long been an obvious destination for financial services companies who may have to move their EU headquarters from the UK after Brexit.
Insurers are particularly keen — several have already started the formal process of setting up subsidiaries, while others are still doing the groundwork to join the 200 insurers already regulated there — but banks reported a cold reception from the Irish regulator.
Last week Ireland’s financial regulator Cyril Roux insisted there was no unwillingness on Ireland’s part to take on any investment banks and that the regulator would recruit new staff as needed. But staffing up the CBI is easier said than done.
In a response to a parliamentary question, Mr Noonan said the CBI wanted to increase headcount by just over 9 per cent next year, with at least 28 of those new people working directly on Brexit and others drafted in for Brexit work as needed.
The finance minister admitted the central bank “can sometimes experience difficulties in hiring and retaining staff in certain areas simply because there is significant labour market competition”. This competition, which Mr Noonan described as a “challenge” for the CBI, is expected to intensify as other financial services companies begin to hire more in Ireland.
The finance minister gave no indication that he would lift the pay caps introduced during the financial crisis which the central bank says are an impediment to recruitment. Paul Walsh, head of Dublin-based actuarial recruitment group Acumen, said staff moving to the central bank can expect to earn between 10 and 30 per cent less than they would in the private sector by the time a public service pension levy is factored in. “It’s very difficult, they [the CBI] struggle to get people,” he said.
Staff shortages mean it will be harder for the central bank to deal with licence applications in a timely manner. Eddy Van Cutsem, chief executive of insurance industry group Dima, says there have been “a lot of inquiries” from insurers already. “The companies that already have some business in Ireland will add to it — it would be a natural development,” he said.
Banking industry insiders say they have been told it could take up to two years for the licensing process. The CBI denied this but Mr Noonan said he could not give a firm timeframe on how long licensing would take.
Mr Walsh said the insurance industry at large faced a shortage of general insurance actuaries and that he often had to “import” these in for new roles. “We struggle today as it is pre-Brexit, we would definitely struggle post-Brexit,” he said. Mr Walsh’s annual survey of actuarial pay for 2015 showed the first year of consistent pay inflation he has seen. Kevin Thompson, chief executive of Insurance Ireland, said while there was a “challenge on the talent side”, it was “a gap we can fill”.
High-quality accommodation needed
Property is another challenge facing Dublin. The Irish capital lacks the type of high-quality city-centre rental accommodation that appeals to the well-paid, well-housed employees of the global banking industry. “It’s beginning to appear on the market, but we need much more of it,” said Peter Collins, managing director of Kennedy Wilson Ireland, the developer of the Hailing Station, a new 23-storey mixed use development in Dublin’s financial services centre that will be ready for occupancy in 2019.
According to Savills, the estate agents, 12m sq ft of new offices are planned for the city over the next five years — enough space to house 100,000 workers. Andrew Cunningham, director of offices at Savills Ireland, said about half of that should come on stream by the first quarter of 2019, by which time the impact of Brexit on the City of London, and on the future of the global and Irish financial industries, should be clearer.
General Brexit news:
By John Detrixhe and Silla Brush
8 December 2016
Prime Minister Theresa May has found a surprising ally as Britain and the European Union battle over London’s vital clearing industry — the U.S.
London is the dominant center for clearing euro derivatives — a key financial service that the EU has long sought to relocate to a euro-zone country like France or Germany. Clearinghouses emerged again as a flash point after Britons voted to leave the bloc. But a U.S. official this week cautioned against forcing clearing to relocate.
“It is a mistake to restrict where clearing can occur,” Timothy Massad, chairman of the Commodity Futures Trading Commission, said in a speech on Dec. 6. “Markets benefit from large pools of liquidity. Market participants benefit from managing as many of their transactions together as possible.”
Clearinghouses stand between traders and collect collateral to prevent a default from spiraling out of control. Regulations since the 2008 financial crisis have heightened the importance of central clearing, making those operations a focal point in the financial system.
Because a swap in one currency may offset the risk of a swap in another, keeping them together in one clearing pool is seen as more efficient, saving bank and asset-manager clients money on collateral.
London Stock Exchange Group Plc is the majority owner of LCH, which dominates clearing of interest-rate swaps, a market where some $2.7 trillion of derivatives changes hands daily. LCH handles more than 90 percent of cleared interest-rate swaps trades in major currencies.
LSE Chief Executive Officer Xavier Rolet has repeatedly said it doesn’t make sense to strip euro clearing away from the other major currencies. By one estimate, the savings from keeping LCH intact could amount to $77 billion.
“By splitting the market, it leads to higher costs for end customers such as pensioners,” Jake Pugh, a derivatives consultant, said in an interview today. “Dealers will have to charge a higher price because it increases their expenses.”
As the debate over clearing expands, the date for May to formally begin exit negotiations creeps closer. This week, May won lawmakers’ backing to trigger Brexit by the end of March.
If forced, LSE may move its clearing operations to New York instead of Paris or some other EU city, Rolet has said. That could pit European leaders against their counterparts in Washington if they try to keep euro clearing inside their region.
The U.S. and EU already accept clearing of each other’s currencies in each other’s jurisdictions. Chicago-based CME Group Inc. clears billions in euro derivatives each day. Likewise, LCH clears more than $1 trillion in dollar-denominated swaps daily.
“If Europe were to insist that clearing of euro-denominated products cannot occur in London, does that mean such clearing cannot occur anywhere outside of Europe, including in the United States?” Massad said. Instead of restricting where dollar products are cleared, the CFTC requires overseas clearing firms to register and provide the CFTC with access, he said.
The European Central Bank has cited financial stability as a reason why euro clearing should stay within the bloc. For example, a regulator outside its jurisdiction, such as the Bank of England, could make decisions during a crisis that would benefit its own economy rather than the EU.
“It’s the ECB saying: ‘We don’t trust the Bank of England to regulate LCH properly,’” Pugh said. “If you start introducing protections in reserve currencies, then you’re going down a path of utter madness.”
Massad acknowledged the need for regulators to have oversight.
“It can be valuable to have some degree of oversight into offshore clearinghouses,” Massad said. “EU and U.K. officials will have to decide how to address these issues.”
Financial Times
By Alex Barker
9 December 2016
David Davis, Britain’s Brexit secretary, said he was “not really interested” in a transitional deal to cushion Britain from the effects of Brexit and that he would consider one only in order to “be kind” to the EU.
Financial companies have pressed the government to agree a transition period after Britain leaves the bloc and before new trade terms are finalised, during which current arrangements remain in place.
But speaking in mid-November, Mr Davis told a private meeting with the City of London Corporation that negotiating a transition, as recently championed by Mark Carney, the Bank of England governor, would not benefit the UK and could delay the Brexit process.
Mr Davis accepted, however, that Britain’s “sudden” departure could compromise the EU’s financial stability and said he would be “more in favour” if the EU asked Britain for a transition. “I will be kind,” he said, according to the CLC’s account of the meeting.
One senior EU official involved in Brexit preparations expressed astonishment at the idea that it would be the EU playing the role of demandeur on transition, calling it “deluded”. “There is a denial of reality in London,” the official said. Another EU representative who met Mr Davis said: “I’m fed up with British politicians . . . they have no clue.”
Mr Davis’s bullish views were aired during a meeting with the CLC on November 15, an internal note of which was leaked to the Financial Times. His reservations about a transition were repeated in meetings in Brussels and Strasbourg in late November, according to senior European figures.
Over the past week, however, Mr Davis has given more positive signals about potential arrangements to support a Brexit soft landing and he is working more closely with Philip Hammond, the chancellor and strong advocate of a smooth, gradual exit. Senior London bankers see the position of the government evolving.
Even so, the report of Mr Davis’s candid opinions — on groundless whingeing from the City, Britain’s upper hand in talks and “the unattractiveness of Frankfurt” for bankers — will risk adding to growing EU-UK tensions over Brexit.
Berlin and Paris are likely to be especially annoyed by Mr Davis warning that if the EU pushed for a punishing settlement, Britain would switch to a tougher “alternative strategy”, looking to fight for business with “lower tax, softer regulation and other strong business incentives”.
Mr Davis “opined that EU member states such as France had ‘no faith’ in their economic models and ability to compete with an ‘Anglo-Saxon approach’,” the CLC meeting note said.
The department to exit the EU said the government was “engaging widely” with businesses about the “challenges and opportunities” of Brexit. “These are two-way discussions about a whole range of issues and potential outcomes,” it said. “This account does not properly reflect government policy or [Mr Davis’s] view.
“He has made clear that the UK wants a smooth and orderly exit from the EU, a new partnership that works in the interests of both parties, and is looking at all options to deliver that.”
Mr Davis’s private views offer a window on the debate within the government not only over the goals of the Brexit negotiation, but the tactics for achieving them.
Part of his scepticism over a transition stems from his confidence in the possibility of agreeing a full fast-tracked trade deal by late 2018 that would negate the need for an interim deal after Brexit. The Treasury and Brussels see that timetable as almost impossible.
He told the City representatives that the EU’s “inflexible approach” on immigration in particular meant it was unlikely the UK would achieve access to the single market. But he said a trade deal such as the Canada-EU agreement would be relatively easy to secure and would not pose a significant problem for the UK because “most advantages” would be gained.
Mr Davis is also more confident about the balance of interests and the cost to Europe of abruptly cutting off corporate access to the City, the continent’s main financial centre. It echoes a concerted effort across government in recent weeks to emphasise that Brexit is a shared problem for Europe, with costly spillover effects.
Speaking in Brussels on Monday, Mr Hammond stressed a smooth process was needed that “minimises the threat to European financial stability”. He noted the “very many complex relationships that exist between European manufacturing businesses and their financial backers . . . in London”.
Mr Carney has called London “the investment banker for Europe”, pointing out that over half of the equity and debt raised by eurozone companies was issued “in the UK, by firms based in the UK, quite often to investors in the UK”.
“It’s absolutely in the interests of the EU that there is an orderly transition and that there is continual access to those services,” he said.
The CLC said: “This note was the City’s interpretation of our meeting with the secretary of state for Exiting the EU last month. It was a constructive discussion on the opportunities and challenges that leaving the EU presents to the financial services industry and how the City can work closely and positively with the government.”
By Anjuli Davies and Lawrence White
8 December 2016
Barclays Plc (BARC.L) is taking a contrarian bet that Britain’s vote to leave the European Union will help it win more investment banking business in its home market, despite the sharp slowdown in deal activity since the referendum.
The British lender has reshuffled some of its top investment bankers so they can focus on the UK, anticipating that the weak pound and a quiet 2016 will lead to a rise in dealmaking and share listings next year even as the country faces its biggest political and economic shake-up since the Second World War.
At the heart of the strategy is a plan to win more advisory business from British companies the bank already lends to, with Alisdair Gayne leading the charge as head of UK investment banking.
Gayne joined Barclays from Morgan Stanley in 2010, tasked with building out its corporate broking franchise, a role he will retain. Largely a UK phenomenon, corporate brokers act as intermediaries between public companies and their institutional investors. They are meant to be a corporation’s trusted adviser, built up over years of being its eyes and ears in the market.
Although it’s not a particularly lucrative business on its own, the relationships built in corporate broking can be used to clinch big ticket jobs from the company when they decide to pull the trigger on equity raisings and dealmaking.
Since joining Barclays, Gayne has been challenging the grip of the top three brokers in the UK — JPMorgan, Bank of America Merrill Lynch and UBS — on the largest British companies. Barclays is now ranked number 5.
So far in 2016, the bank has won 8 new corporate broking mandates, including tobacco maker Imperial brands and chip designer ARM, which is being taken over by Japan’s SoftBank, a deal the UK bank also won a mandate as adviser on.
Gayne is now being tasked with using corporate banking relationships as well as broking relationships to win more investment banking mandates.
“In the UK we’re not taking full advantage of the big opportunity offered by the strength of our corporate bank,” John Mahon, Barclays head of corporate and investment banking for Europe, Middle East, Africa and Asia, told Reuters last week.
“Those firms ahead of us in UK investment banking aren’t involved to the same extent in corporate banking,” he said in an interview. “The coordination between corporate and investment banking needs to improve.”
Barclays ranks a lowly ninth so far this year in advisory for announced UK target takeovers and eighth for equity capital market business, in value terms, trailing heavyweight U.S. investment banks as well as boutique advisory firms.
The new drive is part of the “Transatlantic” strategy announced by Chief Executive Jes Staley in March to focus Barclays work on Britain and the United States. In the third quarter, 54 percent of the bank’s overall revenues came from its UK business and 31 percent from the Americas.
The value of mergers and acquisition deals between UK companies has plunged 67 percent to a 30-year low since the Brexit vote in June, according to Thomson Reuters data.
Overall, UK investment banking fees earned in the UK are down 14 percent so far this year to total $4.1 billion or 5.5 percent of global investment banking fees and 22.8 percent of the Europe, Middle East and Africa (EMEA) fee pool.
Back in 2000, UK investment banking fees represented 9 percent of the global fee pool and 26 percent for EMEA, according to Thomson Reuters data.
Gayne sees that turning around next year.
“There are a lot of situations where we see companies preparing for next year … we see significant upside in UK M&A and equity deals,” Gayne told Reuters.
That presented a growth opportunity, Mahon said.
“Against a backdrop of EMEA deal volumes being down this year we expect people to withdraw from the market, while we’ll expand and upgrade,” said Mahon.
“Maybe the market is quiet for a while, but I kind of like that … It means it’s not a bad time to invest.”
Barclays ranks number three in Britain in terms of investment banking fees earned year-to-date, netting $230 million worth of fees or a 5.59 percent wallet share. This is up from a ranking of eight in 2008, the year it bought the Lehman Brothers investment banking franchise.
“Barclays is holding its own in the league tables, not slipping the way Deutsche Bank is in Europe and the U.S.,” said David Hendler, independent analyst at New York-based Viola Risk Advisors.
The plan to squeeze more corporate finance deals from existing customers mirrors the successful strategy of U.S. rivals like JPMorgan (JPM.N) and Citigroup (C.N).
It also reflects a broader trend for investment banks to become more specialized, as tougher regulations since the 2008 financial crisis make trying to be in every market increasingly difficult.
Barclays has named former Europe and Asia investment banking co-heads Sam Dean and Crispin Osborne to the roles of head and chairman of corporate finance for EMEA, respectively.
They said the split takes away broader managerial responsibilities and narrows their roles, allowing them to focus on key targets and client relationships while Gayne concentrates on the UK market.
“Jes has come in and said ‘where’s the upside? Where’s the focus?’,” Dean told Reuters.
“UK banks will be the most nimble around Brexit…We have said when things are clearer we are committed to quickly making this work for our clients.”
Barclays on Oct. 27 reported a forecast-beating bounce in third-quarter profits to 1.7 billion pounds, in what Staley hailed as early vindication of his ‘countercyclical’ bet.
The bank has been making cuts elsewhere to bolster its strategy, selling billions of dollars worth of assets to make sure it only has profitable business lines.
By Michael Holden and Estelle Shirbon
6 December 2016
The British government will need to put forward a new law to trigger formal divorce talks with the European Union if it loses a legal battle over who can start the Brexit process, the Supreme Court heard on Tuesday.
The government is appealing against a ruling last month that it needs parliament’s assent to invoke Article 50 of the EU’s Lisbon Treaty, the first formal step towards Brexit, as opposed to using an executive power known as the prerogative to do so.
Prime Minister Theresa May has said she intends to trigger Article 50 by the end of March, and the government’s fear is that going through parliament could disrupt her timetable and give parliamentarians opportunities to water down its Brexit plans.
Senior government lawyer James Eadie told the Supreme Court that if it upheld the earlier ruling, ministers would have to put forward a new parliamentary bill to trigger Article 50.
“It would require not just parliamentary involvement … but primary legislation,” Eadie told the 11 justices on day two of a four-day appeal hearing.
He also said the new bill could be just a one-line piece of legislation: “If the Supreme Court decides against our arguments here then the solution in legal terms is a one-line act.
“Maybe that would lead to all sorts of parliamentary complication and possible additions and amendments and so on, but that’s the solution.”
The government announced on Tuesday it had accepted the Labour Party’s call for it to set out its plans for Brexit before formal talks, while asking parliament to respect its timetable.
Britons voted for Brexit by 52 to 48 percent and the government has said this mandated it to begin the divorce process using the prerogative power.
But its position has been challenged in court on the grounds that only parliament can remove rights granted by a parliamentary act in 1972 which paved the way for Britain to join what is now the EU.
“Parliament did not intend that what it had created could be nullified by a minister exercising a prerogative,” David Pannick, a lawyer for the lead claimant in the case against the government, told the Supreme Court.
Markets take the view that greater involvement by parliament would reduce the risk of a “hard Brexit”. The pound hit a two-month high against the dollar on Tuesday as investors bet the challengers would win in the Supreme Court.
The hearing continues until Thursday and the verdict is expected in January.
8 December 2016
The historic Brexit legal challenge has drawn to a close with a reminder from the Supreme Court that it will not “overturn the result of the EU referendum”.
Lord Neuberger said the case focused on “the process by which that result can lawfully be brought into effect”.
The Supreme Court president promised a decision “as soon as possible”.
The hearing ended with the government’s lawyer arguing ministers have the authority to trigger Brexit.
The case centres on whether the UK government has the power to serve notice of its intention to quit the EU under Article 50 of the Lisbon Treaty or whether, as various campaigners have claimed, it must seek Parliament’s authorisation.
The first case to be heard before all Supreme Court 11 justices, it has pitted some of the leading figures in the legal world against each other and included arguments from Scotland, Wales and Northern Ireland.
The government’s top lawyer, James Eadie QC, told the court rights related to EU membership were created and taken away “on the international plane” rather than by domestic legislation – so a new act of Parliament was not required for Brexit.
Mr Eadie, who presented his argument to the court on Monday, was responding to the points raised during the hearing.
He reiterated his argument that Parliament had wanted ministers to have a “prerogative” power to serve notice under Article 50 of the Lisbon Treaty that the UK was leaving the EU.
Mr Eadie also raised Wednesday night’s Commons vote on Brexit – where MPs overwhelmingly backed the government’s planned timetable – saying it was significant as the House of Commons “indicated its view and has done so clearly”.
However he conceded the vote was not legally binding and if the government loses the case it will need to prepare new legislation to be considered by Parliament.
‘A six-year-old would understand’
Earlier the court heard representations that the Scottish and Welsh governments should be consulted before notice is given for the UK to leave the EU.
Richard Gordon QC, representing the Welsh government, said ministers should not “short circuit” the need for Westminster to consult the devolved administrations when passing certain legislation, describing this convention as “the only glue” holding the UK constitution together.
To allow government to proceed without consulting Parliament could, he said, “crucify human rights”.
He said the “fault line” through the government’s argument was that while its executive “prerogative” powers could be used to make and unmake treaties, they could not “dispense with laws passed by Parliament”.
“This is elementary,” he said. “A child of six, with respect, could understand this point.”
Mr Gordon likened it to a six-year-old being able to understand if they were told they were allowed to play indoors but not outside.
But one of the justices, Lord Carnwath, said the analogy “doesn’t really work” because the child had the power to disobey the order and go outside.
Other interested parties
Another challenge to the government’s position came from Helen Mountfield QC, on behalf of a crowd-funded group of campaigners, who said the the executive “prerogative” power had been progressively eroded since the English Civil War.
Like the Loch Ness monster, the government could not claim it existed just because nobody could see it, she added.
On behalf of European Economic Area nationals, Manjit Gill QC called for legal clarity, saying the government’s approach to Brexit “drives a coach and horses” through the rights of people who had lawfully made the UK their home.
‘Mentally draining’ week for campaigner
Speaking after the case Gina Miller, the investment manager who led the legal challenge to the government, said it had been “emotionally, physically and mentally quite draining”.
She described the “enormity” of having her name attached to the case, saying she hoped “it is for the right reasons” and that her side wins.
Ms Miller also said threats against her had become “quite serious” in the build-up to the case, prompting her to arrive at the court accompanied by security guards.
On the other side, Attorney General Jeremy Wright said Parliament would be “closely involved” in the UK’s withdrawal from the EU, adding: “We have argued that the government can use the powers it has to enact what the public has decided. The judges will now decide if they agree.”
Parliamentary vote
Prime Minister Theresa May has promised to give notice of the UK’s departure from the EU under Article 50 by the end of March – a timetable that was backed by MPs in the Commons vote on Wednesday night.
But while the outcome was welcomed by Brexit campaigners, Downing Street warned it would not override the Supreme Court if it rules that legislation is required before notice of Brexit is served.
The government maintains it has the right to trigger Brexit without seeking Parliament’s authorisation, but lost last month’s High Court case, leading to the landmark appeal in the Supreme Court.
Speaking on BBC Radio 4’s Today programme, Brexit campaigner and former cabinet minister Iain Duncan Smith warned the Supreme Court risked causing a “massive constitutional clash” by “straying into the territory of telling Parliament and government how they want to go about their business”.
But former attorney general Dominic Grieve, who backed Remain, said: “We do not govern in this country by referendum or, for that matter, by Parliamentary motion in the House of Commons.”
The Supreme Court has heard from other interested parties including citizens of European Economic Area countries living in the UK known as AB parties, and Grahame Pigney’s crowd-funded People’s Challenge.
By Ashitha Nagesh
10 December 2016
Supreme Court justices are reportedly set to rule in favour of giving Parliament a vote on Brexit before Article 50 is triggered.
Sources think it will be a seven to four split vote against the Government when the decision is announced next month.
This is despite initial reports that all judges would vote unanimously in favour of a parliamentary vote.
The case is at the Supreme Court after the Government appealed a High Court ruling that Parliament needs to vote on our leaving the EU before Article 50 is enacted.
Gina Miller, a Remain supporter and a partner in an investment management firm, is leading the fight to give Parliament a say.
One source told the Telegraph: ‘It is difficult to predict how the case is going to go, but the thinking of those in the room is that there might be a sizeable minority who are with the Government.
‘The understanding is that it is unlikely to be a slam dunk either way. Even if a majority agree with Gina Miller, there will be a sizeable minority who don’t.’
This speculation comes as pro-EU lawyers launched proceedings in Ireland that could pave the way for Brexit being abaondoned after Article 50, the two-year formal exit process, has been triggered.
Campaigners believe the Irish judiciary is more likely to refer the case to the European Court of Justice.
Jolyon Maugham QC, the barrister leading the legal bid, said he wanted to give voters the opportunity to ‘change their minds’.
The Guardian
By Jon Henley, Jennifer Rankin and Anushka Asthana
6 December 2016
Britain will have less than 18 months to negotiate Brexit and must end up with a worse deal than it currently has as an EU member, the bloc’s chief negotiator has said.
In remarks that seemed to surprise London, Michel Barnier said the EU would need time to define its stance at the start of the two-year exit process, and the European parliament, EU-27 and UK government several months to ratify it at the end.
Adding to the pressure on the government as Theresa May accepted a Labour demand that the government publish its plan for Brexit before triggering article 50, Barnier also said it was “difficult to imagine” an interim deal bridging Britain’s departure from the bloc and any future trade agreement.
“Time will be very short,” the former finance commissioner stressed in his first press conference since taking up the post in October. “It’s clear that the period of actual negotiations will be shorter than two years. All in all, there will be less than 18 months to negotiate.”
Barnier, who has visited 18 EU countries in recent weeks to hammer out a common position on Brexit and aims to hold talks in all 27 remaining members by the end of January, said the EU would base its approach on four key principles.
It would seek first to preserve the unity and interests of its 27 remaining members, he said, and refuse all negotiation before notification. Brexit must be an inferior deal for Britain than EU membership, and curbs on free movement were not compatible with full access to the single market.
“Being in the EU comes with rights and benefits – third countries can never have the same rights and benefits,” he said in Brussels. “The single market and its four freedoms are indivisible. Cherry picking is not an option.”
Barnier said that if the UK triggered article 50 by the end of March, as Theresa May has said she would, formal negotiations on Britain’s departure from the EU could start “a few weeks later”, but agreement would need to be reached by October 2018 to allow time for ratification.
His substantive remarks on the EU’s position came in contrast to comments on Tuesday from May. Amid all the terms – hard, soft, black, white, grey – coined for variations of Brexit, the prime minister said on a visit to Bahrain that “what Britain was actually looking for is a red, white and blue Brexit”.
“That is the right deal for the United Kingdom, what is going to be the right relationship for the UK with the European Union once we’ve left,” May said, without elaborating on what she meant. “That’s what we’re about, that’s what we’ll be working on.”
The continuing opacity of the UK’s Brexit strategy has led to mounting recent frustration in European capitals. Jeroen Dijsselbloem, the Dutch finance minister, called bluntly on Tuesday for a fundamentally “different attitude” from the UK.
“The things I have been hearing so far are incompatible with smooth, and incompatible with orderly,” Dijsselbloem, who also chairs the 19-strong group of eurozone countries, said at a meeting of the group in Brussels.
Responding to May’s comments, the Liberal Democrat leader, Tim Farron, called the slogan “jingoistic claptrap” and said it showed no further policy development. “The prime minister has surpassed herself with this statement,” he said.
Downing St sources admitted Barnier’s comments were the first time it had been made aware EU officials wanted to complete Brexit negotiations within 18 months, but said the Brexit process belonged to the UK as much as to the EU.
“It is the first I had heard of it,” the sources said, adding that the Brexit broker’s remarks had “not been the focus of the prime minister’s day”. But Boris Johnson, the foreign secretary, appeared unconcerned.
“I think that with a fair wind and everybody acting in a positive and a comprising mood … we can get a great deal for the UK and for the rest of Europe within that timeframe,” he said. “That timeframe seems to me to be absolutely ample.”
Underlining the EU’s unusual solidarity on the issue, Barnier’s comments were echoed by the German chancellor, Angela Merkel, who told a conference of her CDU party in Berlin that the “have-cake-and-eat-it” deal apparently sought by London was not on offer.
“The four freedoms – free movement for people, goods, services and financial market products – must be safeguarded,” Merkel said. “Only then can there be access to the single market. We will not allow cherry-picking.”
Barnier said there may be “some point and usefulness” to an interim arrangement to avoid the economic turmoil feared by many British businesses if article 50 talks end and Britain leaves the EU with no future trade agreement yet concluded.
But he said that could only be considered once Britain had explained exactly what it wanted from its future relationship with the EU, and the bloc had established what it could accept.
The EU “needs to know what the new partnership with Britain would look like to weigh up the usefulness of a transitional deal”, Barnier said. “As we don’t know what the UK wants and is waiting for, it’s difficult to imagine one.”
He declined to discuss what kind of future relationship might be possible, though he cited the example of Norway, which accepts free migration and pays the EU in return for access to EU markets.
The chancellor, Philip Hammond, confirmed in Brussels on Tuesday that Britain could continue to pay for access to some parts of the single market.
On the debate in Britain over a hard Brexit, leaving the UK outside the single market, or a soft Brexit preserving more ties, Barnier said he could not say what the difference was.
“I can say what Brexit is,” he said. “We want a clear agreement, we want to reach this agreement in the limited time we have available and we want it to take account of our point of view, the interests of the 27 as defined by the European council, and [be] something that preserves the unity of the 27.”
Europe had assembled a solid team combining all the necessary expertise and would be ready to begin talks as soon as it received formal notification, Barnier said, but added that everyone involved in Brexit was entering uncharted waters.
6 December 2016
Prime Minister Theresa May will reveal more details on the government’s plans for ‘Brexit’ in a bid to fend off a backbench revolt on the issue.
Labour put forward a motion in the House of Commons to be debated on Wednesday, which called for more information on the ‘Brexit’ strategy, and it is thought that up to 40 Tory backbenchers were ready to back the opposition vote before the Prime Minister’s last-minute intervention.
The PM has now tabled an amendment to the motion which allows potentially rebellious Tories to support it but also explicitly backs her to trigger ‘Brexit’ by the end of March.
Labour’s motion acknowledges that some elements of the negotiating position should remain secret but urges Mrs May to “commit to publishing the Government’s plan for leaving the EU” before triggering Article 50.
An amendment in the name of Mrs May accepts the Labour motion but challenges MPs to “respect the wishes” of voters in the referendum and call on the government to trigger Article 50 by the end of March – in accordance with the timetable set out by the PM.
A Downing Street spokesman stressed that the amendment was “a separate issue” from the government’s Supreme Court battle to overturn a ruling that it should obtain Parliament’s approval before triggering Article 50.
The Prime Minister has been clear that we will set out our plans in due course. That remains the position. We won’t be showing our negotiating hand until we have to, but we have not suggested we will not set out the position. That’s what the amendment goes to. – DOWNING STREET SPOKESMAN
Labour described Mrs May’s amendment as a “significant 11th hour concession” and called on her to publish her ‘Brexit’ plan before the end of January.
The party indicated it was willing to back the government amendment, insisting it does not want to delay or frustrate the process of triggering Article 50.
Shadow ‘Brexit’ secretary, Sir Keir Starmer said: “This is a welcome and hugely significant climbdown from the government.
“For the last two months Labour have been pushing the government to put their plan for Brexit before Parliament and the public. Without that plan, we have had unnecessary uncertainty, speculation and a running commentary on the government’s likely approach.
“The victory today is that the government have now finally accepted Labour’s call and committed to publish a plan.
“The government now need to focus on ensuring that plan delivers a sensible ‘Brexit’ deal that protects jobs, the economy and living standards. Labour will hold them to account on this every step of the way.”
Discussing the thinking behind the government amendment, a Number 10 source said: “Crucially, from our perspective, it’s making sure that Parliament are very clear they are not going to use this as a delaying method.
“So it’s now down to MPs to signal that they also want to get on with ‘Brexit’ by supporting our position, which is the government should invoke by the end of March next year.”
6 December 2016
The UK’s financial services sector contributed £71.4bn in tax last year, according to a report on behalf of the City of London.
The total, which was the highest in the report’s nine-year history, accounted for 11.5% of the UK’s total tax receipts.
The report highlights the potential hit to public finances if Brexit restricts access to the EU’s single market.
Nearly a quarter of turnover “went straight to the public coffers”.
The report, by accountancy giant PwC, said the record total was due in part to corporate tax reforms, which delivered an extra £8.4bn, and the bank levy, which resulted in lenders paying out £3.4bn.
However, the sector’s contributions hang in the balance ahead of Brexit negotiations with the EU, said Andrew Kail, head of financial services at PwC.
“The report highlights an increasing reliance on tax receipts from banking and insurance firms,” he said.
“With the added potential adverse impacts of Brexit on the sector, the question arises as to whether the current levels of tax contribution are sustainable.”
Passporting rights
Financial firms in the UK have become increasingly concerned about their ability to trade with Europe after Brexit.
They are waiting to discover whether the UK can hold on to “passporting” rights, which allow lenders to trade freely across the EU.
The financial services sector currently employs 1.1 million people in the UK, or 3.4% of the national workforce.
Mark Boleat, policy chairman of the City of London Corporation, said access to skilled EU workers, the single market and financial services directives were among the areas of concern.
“As one of the UK’s biggest service exporters, it’s understandable the sector also contributes a considerable amount of tax. Despite this, the sector arguably stands most to lose as negotiations loom,” he said.
Brexit uncertainty
On Tuesday, Chancellor Philip Hammond said the UK would weigh up the “costs and benefits” of continuing to pay money to the European Union for access to the single market after it leaves the bloc.
Last week, the Brexit Secretary, David Davis, said paying for access was a possibility.
Mr Hammond said: “What he [Mr Davis] said was we wouldn’t rule out the possibility of some ongoing contribution in some form if we have an ongoing relationship.
“And that would be something that we’d have to look at, looking at the costs, and looking at the benefits, and making a decision based on what’s in the best interest of the British taxpayer.”
In a speech at a tax event on Tuesday, Jane Ellison, Financial Secretary to the Treasury said:
“We know that there will be a period of adjustment as we gear up to leave the EU. And we know that there is real uncertainty in this sector about what comes next.”
She said the government would be “pressing for a deal that will help our vital financial services sector to be every bit as successful after our withdrawal as before”, adding that Brexit would mean “new opportunities”.
The Guardian
By Julia Kollewe
6 December 2016
The Brexit vote will lead to a slump in office construction, with up to half of planned developments in central London likely to be postponed or scrapped in coming years, according to estate agent Savills.
Commercial development has barely recovered from the post-financial crisis slump, and the uncertainty surrounding the terms of Britain’s departure from the EU will trigger another 30% to 40% decline across the country in the next five years, Savills said in its annual forecasts. Central London will be worst hit.
Its report said: “The seismic shock of the Brexit vote brought transactional activity in many cases to a juddering halt, a pause at least to reconsider pricing as opposed to pulling out of deals.”
Several commercial property funds suspended trading in the summer to stop withdrawals from panicking investors fearing a collapse in property values, but all funds have since re-opened.
Worried about the impact of Brexit on the City, banks are considering moving operations to mainland Europe and there have been warnings that 100,000 jobs could go if London loses its ability to process euro-denominated transactions. This would sharply reduce demand for new office space.
Savills is predicting a 4% fall in UK office prices next year followed by a 1% drop in 2018. Thereafter it forecasts a slow return to growth, pencilling in price increases of 1.1% in 2019, 2.5% in 2020 and 3.2% in 2021. This translates into 1.6% growth over the five-year period.
Mat Oakley, head of UK & European commercial research at Savills, said: “In London offices we have seen about a 5% fall this year, and there is probably another 2% to 3% to go – assuming we get a reasonably soft Brexit.”
The gloomy predictions come a week after the City’s biggest tower, 1 Undershaft, received planning permission. The developer, Singapore-based Aroland Holdings, says it will house 10,000 workers. Another tower at 22 Bishopsgate has also been given the green light. The developer, French-owned fund management firm Axa, had warned before the referendum that that it might pull out in the event of a Brexit vote, but decided to push ahead in October.
Oakley said there had been an increase in overseas investors piling into London offices and other UK commercial assets since the June referendum, all attracted by the weaker pound. As domestic investors are in retreat, the proportion of foreign buyers is about to rise to a record high of about 60% between October and December, up from a recent average of 42%.
While the Brexit vote came as a shock in June, other events such as the election of Donald Trump in the US and the upcoming elections in France and Germany next year meant that the UK is regarded as somewhat less risky than before, he added.
With London property so expensive, investors from the Middle East have been hunting for cheaper deals outside the capital, in places such as Birmingham, Edinburgh, Glasgow and Bristol.
The Savills report said: “Lower levels of domestic demand, particularly at larger lot sizes will give non-domestic investors a clearer playing field.” The next five years are likely to experience record levels of international investment in commercial property outside London, ranging from office blocks to shopping centres, warehouses and data centres.
Mark Ridley, chief executive of Savills UK and Europe, said: “The sterling devaluation has made UK property very attractive for international investors pegged to the dollar or euro, with 2017 activity in central London likely to be dominated by Asian investors, with American and pan-European investors also strong nationally.”
Sterling has lost 13% of its value against the dollar since the referendum and is down almost 9% against the euro. At one stage it had lost almost 20% of its value.
Another draw for foreign investors is that they continue to be taxed in the same way as UK buyers, unlike countries such as the US which have imposed extra non-dom taxes.
Savills also sees an end to the post-credit crunch house price boom, forecasting that residential prices will flatline next year after five years of increases. London’s luxury property market has been hit in particular, as Brexit uncertainty and increased stamp duty have been putting off foreign buyers.
Lucian Cook, head of residential research at Savills, noted that there had been a shift in housing policy under housing and planning minister Gavin Barwell, with a bigger emphasis on building more homes across a wider range of tenures such as homes for rent. But a representative from Church Commissioners, who manage the Church of England’s £7bn investment fund, suggested that Cook was painting too rosy a picture.

Select Milano Monitor 04/12/2016

Caccia al tesoro di Londra Milano in corsa


By Ettore Livini

28 November 2016

  • It is noted that the race is on across the European continent to attract those institutions forced to leave London post-Brexit, including the European Banking Authority the European Medicines Agency and the Unified Patent Court, as well as financial institutions and banks. Milan seeks to bag one of the key agencies, with its sights set on the Medicines Agency, and also seeks to attract human capital leaving London through providing tax incentives — a measure put forth by Select Milano.
  • Milan’s Mayor Giuseppe Sala is keen on helping Milan to benefit from Brexit, but says the city must be quick because others like Amsterdam, Madrid, Warsaw and Dublin are already moving.
Milano che banche, che cambi. Davvero la città può tornare quella che cantava…
By Ettore Livini
28 November 2016
  • Discussion of Milan’s efforts to capitalise off of Brexit, and the effects that Brexit will have on financial services in the City, particularly euro-denominated clearing.
  • Select Milano, which was founded to promote Milan as a post-Brexit alternative for financial services, estimates a potential positive impact of 1.5% on Italy’s GDP if its financial industry stands to benefit from Brexit. However, competition is fierce between other major financial capitals like New York, Frankfurt, Paris and Amsterdam.
  • The Italian Government has taken steps to make the country more attractive such as the provision of tax breaks for financiers, but Select Milano would also like to see an elimination of the Tobin Tax as another measure.
Milano Finanza
By Ugo Poletti
3 December 2016
  • The need for Milan to engage in more effective place marketing to promote itself is discussed in this piece by Ugo Poletti of Select Milano; it is suggested that Milan should replicate the experiences of London & Partners which promotes London overseas. Other key European and world cities, like Barcelona, Berlin, Manchester, Amsterdam and Paris, all have such agencies, but Milan has historically underestimated the need for one, and the city should now be recognised for more than fashion and design, including its infrastructural financial and cultural offerings as well.
  • A place marketing agency would be the most effective instrument to promote the city’s strengths and would help to act as a lever for development. The fact that it’s a “pocket-sized” metropolis, it is internationally-focused and that it has a strategic geographic position gives it a leg up over other cities, particularly in light of the flight of financial institutions post-Brexit.
La Tribune
By Delphine Cuny
29 November 2016
  • Organisation Paris Europlace compiled a report outlining the advantages that Brexit could bring to the continent in terms of the potential departure of banks and financial institutions from London. It highlights, in particular, France’s suitability to attract such institutions, while also touching on potential downfalls like France’s tax system.
  • The report also compares the attractiveness of cities like Amsterdam, Frankfurt, Madrid, Brussels, Luxembourg and Dublin, but does not include Milan due to the country’s fragile banking system as a potential disqualifier.
  • It is also mentioned that some in France even advocate for the creation of a free zone in the future to attract such institutions, a measure also championed for Milan by Select Milano.
Milan and Brexit:
Affari Italiani
2 December 2016
  • Prime Minister Matteo Renzi said that a victory for his government in the referendum, which did not come to fruition, would have brought greater stability to the country which would have set a positive backdrop in the country’s efforts to help Milan to become the new capital of the Eurozone post-Brexit.

Europe and Brexit:

UBS picks Frankfurt over London for wealth management business


By Ben Martin

1 December 2016

Swiss bank UBS has merged most of its wealth management operations into a new business in Frankfurt, in a significant boost to the German city as it seeks to establish itself as a rival financial hub to London following Brexit.
The new subsidiary, called UBS Europe SE, combines the bank’s German, Italian, Luxembourg, Austrian, Danish, Swedish, Dutch and Spanish wealth management businesses into one legal entity headquartered in Frankfurt.
Its French and British private banking operations will stay where they are for now, although the bank plans to fold them into UBS Europe SE in the future.
UBS has been planning the wealth management merger for years and London, Luxembourg and at one point Milan were all considered as potential headquarters for the subsidiary, which retains a network of branches across Europe .
While a spokesman for the Swiss bank insisted the decision to pick Frankfurt “had nothing to do with Brexit”, the move is nevertheless is a fillip for the German city following the EU referendum.
Frankfurt, along with Paris, Dublin and other European cities, is attempting to lure business away from London in the wake of the June vote to leave the EU.
Banks and other finance firms in the City fear they will lose their so-called passporting rights that give them access to the EU single market following Brexit. Many companies are examining options to shift London-based European operations elsewhere to guarantee that they can continue to do business in the EU.
Switzerland is outside the EU and having a new business in Frankfurt could theoretically be used to ensure UBS has passporting rights.
UBS, which has significant operations in London, said that the timing of the merger of its UK wealth management business into the new subsidiary depended on how the Brexit negotiations panned out.
It described setting up the Frankfurt business as “an important step to simplify its governance structure and increase operational efficiency across its European operations”.
Separately, it emerged that Barclays is closing down its energy trading business as part of a wider move by the bank to cut back its commodities exposure. The move will affect dozens of jobs.
By Gavin Finch and Nicholas Comfort
1 December 2016
Citigroup is considering moving some of its London-based equity and interest-rate derivatives traders to Frankfurt after Brexit is triggered, according to people with knowledge of the matter.
The US firm is already in discussions with the German financial regulator BaFin about getting the necessary approvals, said the people, who asked not to be identified because the talks are private. Citigroup’s plans could change depending on how the negotiations between the UK and European Union develop, one of the people said.
Citigroup’s efforts show banks are shifting from warning about moving jobs from Britain to firming up plans to do so by picking specific destinations. The US bank expects to have desks up and running across the region before the end of the expected two-year negotiation period and is in discussions with the European Central Bank and regulators in EU nations including Ireland about relocating other parts of its operations, one of the people said.
“We are evaluating our options as negotiations between the EU and UK continue,” Edwina Frawley-Gangahar, a Citigroup spokeswoman, said in an e-mailed statement. “Considerable uncertainty remains over the nature of the UK’s eventual exit from the EU, and therefore we have not taken any decisions at this point. London is, and will remain, our EMEA headquarters and a global hub for many of our businesses.”
Spokesmen for BaFin and the ECB declined to comment.
Executives from banks including Citigroup, JPMorgan and Morgan Stanley have said they will move staff from London if the UK is stripped of so-called passporting rights. The problem is particularly acute for Wall Street firms, who have a majority of their European employees in London. Eighty-seven percent of US investment banks’ EU staff are located in the UK, which is also home to 78 per cent of the region’s capital markets activity, according to New Financial, a think tank.
Officials from a host of European locales, such as Paris and Luxembourg, have been courting London-based investment banks ever since the UK voted to leave the EU on 23 June.
Germany’s financial capital has an asset in BaFin, one of the few regulators in the region with experience overseeing complicated derivatives trading businesses. That’s not the case in Dublin, often touted as a likely destination for U.S. banks given language and cultural ties. Ireland’s financial regulator has made it clear that it would not be comfortable with the nation housing derivatives operations, one of the people said.
One of London’s historic advantages over Frankfurt has been German labour laws, which make it harder for banks to fire staff in a downturn. In a bid to make Frankfurt more attractive, the regional Hesse government is exploring ways to loosen those rules.
The head of the Frankfurt Main Finance trade body, Hubertus Vath, said last month that he expects as many as 10,000 jobs could move to Frankfurt from London over the next five years. Hesse Economy Minister Tarek Al Wazir said this week that he expected the Frankfurt region to draw several thousand jobs and noted that a Korean bank had already chosen the area over London, potentially meaning the hiring of as many as 15 people.
By Zlata Rodionova
1 December 2016
Ireland’s central bank has been receiving applications for licences from UK authorised financial firms seeking to relocate from London in the wake of the UK vote to leave the EU, a top official said on Thursday.
Cyril Roux, the deputy governor of the Central Bank of Ireland, said that “several” UK based firms have started the application process to be authorised in Ireland.
“We’re seeing applications throughout the whole spectrum. We have applications for new business, the licensing of firms who are not present here but we also see very significant indications from regulated firms that are small today but want to be big tomorrow,” Mr Roux told reporters.
“We see the whole gamut of firms inquiring for establishing or growing in Ireland, it is MIFID (markets in financial instruments directive) firms, insurance companies, CSDs (central securities depositories), payments institutions,” he added.
His comments come as Brexit Secretary David Davis on Wednesday revealed the Government is potentially willing to pay the EU in return for the UK gaining access to the single market.
It is the first time any minister has admitted Theresa May’s administration is open to the idea of paying Brussels to secure access to the trading bloc for British businesses and immediately led to a surge in the pound.
The disclosure comes as the Government comes under increasing pressure to give more clarity over what kind of deal the UK could seek when it leaves the EU.
Dublin is among a number of European cities seeking to woo firms considering a move away from London to maintain their access to EU markets, and faces competition from Paris, Frankfurt, Berlin and Luxembourg, among others.
UK banks fear that a hard Brexit will result in the UK leaving Europe’s single market and therefore the loss of crucial passporting rights, which allow them to sell their services freely across the rest of the EU and give firms based in Europe unfettered access to Britain.
The loss of these rights could be devastating to the City of London as nearly 5,500 firms registered in the UK use passporting rights to operate in other countries.
Last month, James Bardrick, the UK head of US bank Citi, said the main questions businesses have to answer is how quickly they need to act on contingency plans aimed at protecting their businesses should the UK leave the single market.
Rob Rooney, the chief executive of Morgan Stanley, gave a blunt warning that jobs would have to move back into the EU if Britain was shut out of the single market.
Sky News
29 November 2016
A region of France has launched a campaign trying to attract British investment after Brexit.
Hauts-de-France, the northern part of the country encompassing Calais and Lille, is calling on British businesses to consider using it as a foothold inside the European Union.
Some UK companies are considering their options for doing business in Europe after the UK leaves the EU, a process set to begin with the triggering of Article 50 in March.
Yann Pitollet, managing director of Nord France Invest, said he hoped such companies might consider France’s north as “an alternative”.
He told Sky News business presenter Ian King: “Actually we are not here as predators.
“Of course we don’t know what’s going to occur from the negotiations of Brexit.
“We believe that certainly London is still a fantastic place for services companies and financial services.
“The idea is to say that there might be some alternatives.”
He added: “Our purpose is to bring them some solutions saying that maybe they want to share the risks and they want to still have a foot in the EU for the coming years.”
In October, the head of the British Bankers’ Association Anthony Browne said banks were among the businesses looking overseas, with “many smaller banks” planning to move before Christmas.
He said larger institutions were expected to follow within the first few months of next year, adding that their hands were “quivering over the relocate button”.
Mr Pitollet said: “We know already that some financial companies have decided to set up in Frankfurt or Dublin.
“But we want to say to them that there are other regions and… we believe that Lille and other cities in the region could be a very interesting location for these kinds of companies.”
He added that the possibility of some French companies deciding to move into the UK to take advantage of post-Brexit conditions did not concern him, as this would be “a win-win situation”.

General Brexit news:

ECB CHIEF: Brexit will hurt the UK more than Europe

Business Insider

By Ben Moshinsky

29 November 2016

Mario Draghi, president of the European Central Bank, said the UK would “first and foremost” bear the economic costs of Brexit.
Draghi, speaking to members of the European Parliament on Monday, said that while the British economy had been “resilient” following the June referendum, output is “generally expected to slow down.”
Closing off economic and trade ties may lead to less direct investment flowing into Britain from abroad, Draghi said.
He said that membership of the single market had been a “fundamental asset” to the UK, allowing it to access and provide funding for businesses and banks at low cost, according to BBC News.
Asked about threats to the City of London, the ECB chief said uncertainty would rule until “the final shape of negotiations” is known.
The UK government is keeping its strategy secret until talks start. But, according to a document photographed by a freelance photographer, the UK’s negotiation strategy may include trying to “have its cake and eat it.”
This may mean pushing to restrict EU citizens coming across the border while at the same time retaining unified trading conditions in the single market – something the EU is unlikely to accept.
Steve Back, a photographer that is known for capturing sensitive information, photographed a handwritten note carried by an aide of Mark Field, the MP for the Cities of London and Westminster.
30 November 2016
London could seek a deal to enable firms in the capital to continue recruiting staff from the European Union after Brexit, mayor Sadiq Khan has told business leaders.
In a speech to the Institute of Directors (IoD), he said he will hold a summit in the new year to consider proposals from business groups.
The mayor believes London firms must retain access to a skilled workforce.
He also accused ministers of not listening to the concerns of the City.
Mr Khan told the IoD he has been pressing the government to adopt a negotiating stance which satisfies demands for skilled workers.
He said his monthly meetings with ministers have given him the impression that “it doesn’t look like they are listening”.
“London’s businesses must retain access to the skilled workforce they need in order to grow – it’s absolutely essential to protecting jobs, growth and tax revenues across Britain over the next decade,” the mayor said.
‘Best possible deal’
“If the government ignores the needs of business and pushes ahead with a new system that cuts off access to skilled workers, then we will have no choice but to look at a London-specific solution.”
Setting out plans for a London summit, he added: “The City of London Corporation and London Chamber of Commerce have already done some crucial early thinking about options – but we need to go further and faster to make the case to the government and develop a new system.”
About 616,000 people born elsewhere in Europe currently work in London, equivalent to 12.5% of the capital’s workforce.
They include 88,000 in the construction industry, 49,000 in financial and insurance work and 58,000 in professional, scientific and technical activities.
A spokesperson for the Department for Exiting the European Union said: “We’re determined to get the best possible deal for the UK and are preparing for a smooth and orderly exit from the EU.
“There is no benefit to Britain by providing a running commentary on every twist and turn of these negotiations.
“However, it must be a priority to regain control over the number of people coming to the UK from Europe while getting the right deal for trade in goods and services.”
Financial Times
By Daniel Davies
4 December 2016
The City of London is trying to put on a brave face. Dublin is too small. Nobody wants to live in Frankfurt. Paris probably cannot handle the telecoms. Amsterdam — well, let’s not think too much about Amsterdam.
The point is that we, the financial elite of five time zones, live, work and send our children to school in London and its suburbs, and we do not want to move. So, Brexit or no Brexit, a way will be found around the rules. That is what we are good at, isn’t it?
It is not a pressing question for everyone. Those on graduate training schemes will get into management consultancy or head for Shoreditch and start up a company. Similarly, an older cohort who have made money — and avoided spending it on school fees and divorce — can take Brexit as an opportunity to cash in and head for the sun.
But that leaves a lot of people to worry. There are two main ways to deal with the stress: depression or megalomania. On one hand, it is possible to think like the sender of a notorious viral email in 2010: “We Are Wall Street”. As the recently fired author put it: “We are not dinosaurs. We are smarter and more vicious than that . . . we eat what we kill and when the only thing left to eat is on your dinner plates we’ll eat that.”
If you really believe you are the best of the best, you might not worry about changing industries. There are local government officials and education administrators who earn basic salaries not far off a senior investment banker after all, and if bonus prospects are not great, these are offset by shorter hours. It is possible to convince yourself that a mediocre banker would top the league in any other profession.
But there are moments of deep angst. Unlike doctors, lawyers, even accountants, bankers rely on an institution to practise their profession. You cannot go home and open up a credit-default swap trading desk. Nor can you backpack in New Zealand and pick up bits of derivatives structuring work when you run out of money.
Even accepting a massive cut in income, would a banker be able to operate as a middle manager in an industrial company? When your personality and skill set has been shaped by fast-moving markets and megabuck deals, will anyone trust you to handle accounts receivable for a food merchant in Lincoln?
Do not worry too much, though, bankers. To the extent that your human capital is specific to London-based investment banking, that is also the extent to which your job is unlikely to move. What the City veteran has, which nobody can easily replicate, is a web of social connections and relationships with other City veterans. The financial market is a market, and in any market from Camden Lock to the Grand Bazaar, you get the best deals only if you have a book of contacts whom you speak to, socialise with and occasionally marry.
A designer of algorithmic interest rate trading systems might be left behind if euro-denominated clearing leaves London. His or her job is based on technical skills rather than socialisation, and there are PhD statisticians and engineers in Europe, too. But a designer of algo systems is likely to be an elite computer programmer and unlikely to stay unemployed for long.
By contrast, a senior equity capital markets syndicate banker has a skill set composed almost entirely of knowledge of the personalities, tastes and stock holdings of a few middle-aged financial professionals. This knowledge would be worthless in any other context. But for this reason, it is hard to replicate. That business will only move if and when critical mass is established overseas.
So if Brexit throws bankers on to the labour market, they will be people between these two poles — limited technical qualifications, but lots of experience in people management. They will be veterans of businesses with close ties to Europe. They will be hard workers, good at cultivating contacts. And they will be looking for interesting work, with high pay and perks. They will generally be politically Conservative. If the government and parliament do not manage to protect the City, they might unleash competition for their own jobs.
By Ben Chapman
29 November 2016
The EU cannot allow London to maintain its position as the dominant financial centre in Europe after Brexit unless the UK remains bound to all of the EU’s rules, a top European official said on Tuesday.
Jeroen Dijsselbloem, the president of the Eurogroup of nations that use single currency, said the EU must “stand firm” in the face of expected resistance from the UK government.
“We cannot allow a third country to have access, full passporting rights to the financial services market in Europe, if at the same time we allow them to deviate on capital requirements, consumer protection standards, whatever,” Mr Dijsselbloem told members of the European Parliament on Tuesday.
“We can’t allow the the financial services centre for Europe and the eurozone to be outside Europe and the eurozone and to go its own way in terms of rules, regulations and requirements,” he said. “Simply… we cannot allow that to happen.”
“We have to take a firm stand on this, there is no alternative,” the Eurogroup president said. This “of course doesn’t appeal to the British,” he added.
If Britain does not continue to abide by European law, London will lose its dominance as the continent’s financial hub, he warned.
Mr Djisselbloem, who is also the Dutch finance minister, noted his country’s close historical ties with Britain and said the EU must attempt to mitigate the economic impact of Brexit for all parties, not just those remaining in the Union.
He also warned that the fallout from Brexit may harm the UK by slowing investment.
“Investors are simply hedging their risks, they need to take decisions, this year, next year, for the coming years,” he said.
“So they will rethink their investments, and I say this without any joy at all, this will start having an impact on the British economy, the City, in coming years.”
“It’s going to be a tough ride, specifically for the UK.”
Mr Djisselbloem’s words come after an embarrassing document, reportedly a leaked UK government memo, appeared to admit that the country is unlikely to be able to maintain single market access.
The Prime Minister of Luxembourg Xavier Bettel responded to a so-called “secret memo”, telling AFP: “They [the British government] want to have their cake, eat it, and get a smile from the baker, but not the other things. There are European values which cannot be separated. No cherry picking.”

Brexit: Legal battle over UK’s single market membership


By James Landale

28 November 2016

The government is facing a legal battle over whether the UK stays inside the single market after it has left the EU, the BBC has learned.
Lawyers say uncertainty over the UK’s European Economic Area membership means ministers could be stopped from taking Britain out of the single market.
They will argue the UK will not leave the EEA automatically when it leaves the EU and Parliament should decide.
But the government said EEA membership ends when the UK leaves the EU.
The single market allows the tariff-free movement of goods, services, money and people within the EU.
The EEA, set up in the 1990s, extends those benefits to some non-EU members like Norway, Iceland and Liechtenstein.
Non-EU members are outside the Common Agricultural Policy and customs union, but get barrier-free trade with the single market in return for paying into some EU budgets and accepting the free movement of workers.
If the courts back the legal challenge and give Parliament the final say over EEA membership, then MPs could vote to ensure that Britain stays in the single market until a long-term trading relationship with the EU has been agreed.
‘Not automatic’
The pro-single market think tank British Influence is writing to Brexit Secretary David Davis to inform him that it will seek a formal judicial review of the government’s position.
The group warned that if the government did not get a clear legal opinion it could potentially end up acting outside the law.
All EU member states are in the European Economic Area and it had been assumed that when Britain leaves the EU it would automatically leave the EEA as well.
But some lawyers argue that leaving the EEA would not be automatic and would happen only if Britain formally withdraws by triggering Article 127 of the EEA agreement.
The legal question is focused on whether the UK is a member of the EEA in its own right or because it is a member of the EU.
Professor George Yarrow, chairman of the Regulatory Policy Institute and emeritus professor at Hertford College, Oxford, said: “There is no provision in the EEA Agreement for UK membership to lapse if the UK withdraws from the EU.
“The only exit mechanism specified is Article 127, which would need to be triggered.”
In other Brexit developments:
  • A pro-Brexit campaign group says it has abandoned plans for a demonstration outside the Supreme Court ahead of next week’s Article 50 legal hearing. Leave.EU says it is concerned any protest could be hijacked by “far-right” elements
  • Campaigners urge the government not to “cherry pick” different parts of the economy for special trade agreements with the EU after Brexit
  • Polish Prime Minister Beata Szydlo, who is meeting Theresa May for talks in Downing Street later, wrote in the Daily Telegraph that she would be a constructive partner in Brexit negotiations but warned there would need to be compromise in the talks between the UK and EU
  • Eighty-one MPs and peers have signed a letter to European Council President Donald Tusk calling for a deal to protect the rights of both Britons living in other EU countries and EU nationals in the UK
At the the very least this latest challenge could mean a lengthy legal process – potentially via the European Court of Justice – that could delay Brexit negotiations.
If the courts say Article 127 does need to be triggered, there is the question of whether an act of parliament would be needed for it to be authorised.
‘New wheeze’
The government is already fighting in the courts to stop MPs getting the final say over triggering the Article 50 process.
Downing Street said the UK was only party to the EEA agreement through its EU membership and the government’s position was clear that “once we leave the EU we will automatically leave the EEA”.
The PM’s official spokeswoman said Theresa May was focused on delivering the will of the British people with regard to Brexit and preparing for the upcoming negotiations.
Conservative MP and Brexiteer Dominic Raab said: “Rather than coming up with new legal wheezes to try and frustrate the will of the people, these lawyers should be working with us to make a success of Brexit.
“The public have spoken; we should respect the result and get on with it, not try to find new hurdles that undermine the democratic process.”
2 December 2016
The UK could seek a deal which would allow sections of the economy to remain within the EU’s customs union after Brexit, international trade minister Greg Hands has suggested.
Mr Hands said officials would be able to choose the type of products to be covered by agreements.
The union operates alongside the EU’s single market and free trade area.
It comes after the Brexit secretary said the UK would consider paying for “best possible” single market access.
The customs union includes all 28 EU nations, but also Turkey, Monaco, San Marino, Andorra and non-EU UK territories such as the Channel Islands.
They enjoy free trade with each other, but must impose the same tariffs on goods from nations outside the pact and are barred from doing bilateral trade deals with other countries.
Bloomberg news agency published remarks Mr Hands made in an interview this week in which he said the “history of international trade has got all kinds of examples of customs unions”.
He said the UK could be selective about which individual sectors it wished to be covered by any customs union arrangement.
Mr Hands added: “You can choose which markets, which products the customs unions affect and which they don’t, so there isn’t a binary thing of being inside the customs union or outside of the customs union.”
As the pound posted its fifth consecutive week of gains against the euro, Mr Hands’s words were cited by financial market commentators as further evidence that fears over a “hard Brexit” were easing.
In the Commons on Thursday, Brexit Secretary David Davis had said the “major criterion” was getting the best access for goods and services to the European market.
Later, in a speech to CBI Wales in Cardiff, Mr Davis sought to reassure business leaders that immigration controls after Brexit will not be imposed “in a way that it is contrary to the national and economic interest”.
But Brexit-backing Tory MP Peter Bone said “people would be absolutely outraged” if the UK continued to pay the EU after Brexit.
And another prominent Leave campaigner and former Conservative cabinet minister, Iain Duncan Smith, told the BBC he believed Mr Davis had been simply not ruling anything in or out of the government’s Brexit negotiations.

Select Milano Monitor 20/11/2016

Select Milano news:
Smart Stock News
By Blake Audett
14 November 2016
Royal Bank of Scotland Group PLC (NYSE:RBS) Chairman, Sir Howard Davies, has said that banks could pull out from Britain if the Brexit transitional plan is not drafted soon. He said that banks would soon move out and not wait for the full negotiations.
Not making the agreement soon will be damaging for the economy as it leaves banks in an uncertain situation, forcing them to make a decision soon, according to Mr. Davies. He also said that US and Japanese banks were not taking the possibility of a hard hit from Brexit lightly. Those banks were working on their contingency plans and could soon shift their operations somewhere else.
“They will not wait because they have to make a decision which will allow them to be, to continue to function in the event of a hard Brexit if that’s a possibility,” adding, “So they will not sit back, they are currently making contingency plans and once you’ve got a contingency plan – hey, there is a risk you might implement it one day.”
He is of the opinion that there is no need for the government to reveal its full negotiating position, but it should reassure London and keep its residents updated on the progress it is making towards the exit. Doing this is essential to avoid a sudden or bumpy exit from the European Union.
Other major cities, especially the financial hubs of Europe, are getting ready to take full advantage of the hit which London is expected to bear due to the Brexit negotiations. For instance, an independent organization in Italy called Select Milano has already been endorsed by the Italian government, ready to take full advantage of the UK leaving the EU, and purportedly to help/support the financial sector of Europe after London leaves EU.
Business Matters Magazine
14 November 2016

Originally posted on The Guardian.

The chairman of Royal Bank of Scotland has warned that banks could pull operations out of Britain unless Theresa May draws up transitional arrangements for the country’s exit from the EU, reports The Guardian.
Sir Howard Davies said it would be damaging if there was no transitional plan and that banks would have to make decisions based on uncertainty.
Speaking to ITV’s Peston On Sunday programme, he said the US and Japanese banks were concerned by the prospect of a hard Brexit and were drawing up contingency plans.
“I think it is damaging if we don’t get a transitional deal because I think you will then see banks and financial institutions making decisions on the basis of uncertainty.
“They will not wait because they have to make a decision which will allow them to be, to continue to function in the event of a hard Brexit if that’s a possibility.
“So they will not sit back, they are currently making contingency plans and once you’ve got a contingency plan – hey, there is a risk you might implement it one day.”
Davis said the government did not need to reveal its full negotiating position, but needed to reassure the City so Britain did not encounter a “jerky and sudden” departure from the EU.
His comments come as a group of financiers and lawyers based in Milan draw up proposals for a post-Brexit financial services centre for Europe hinged around London and the Italian city.
The aim of Select Milano, an independent organisation endorsed by the Italian government, is not to steal business from London but to help financial services thrive in Europe after the UK leaves the EU.
Its chief executive, Bepi Pezzulli, said one idea that was being drawn up was Dublin as satellite because the Irish legal system was closest to the principles of English law that financiers were accustomed to.
“I don’t think destroying or fragmenting the City of London is a good way forward,” said Pezzulli. “Destroying a cluster is not good. We should instead enlarge the cluster and make London and Milan the head of a new cluster.”
The cluster is a reference to the varied businesses that are based in London, such as banking, fund management and private equity, and the services that build up around them, such as accountancy and legal services.
As a result of Brexit, financial services firms operating out of London are expected to have to shift business – and jobs – to other parts of the EU to enable them to keep access to the “passport” which allows them to sell products across the EU with ease.
Dublin, Frankfurt, Paris and Madrid are among the cities keen to benefit from any exodus from London. There have been warnings, though, including from a Bank of England deputy governor, that New York could end up being the main beneficiary from any loss of business from London.
The Bank of England deputy governor Sir Jon Cunliffe said this month that while it was possible that some activities currently carried out in London would need to move elsewhere in Europe, it would take time for any one financial centre to acquire the “cluster” effect of the UK capital.
Select Milano is targeting one of the largest aspects of London-based business: euro-dominated clearing. Although the UK does not use the euro, London is the centre of €570bn of trading in financial products in Europe’s single currency.
Much of this business passes through the London Clearing House, partly owned by the London Stock Exchange, which is in the throes of a merger with Frankfurt-based Deutsche Börse. The LSE also has links in Milan, owning the stock exchange and operating the Italian clearing house.
Pezzulli, a lawyer, said: “We are not joining a queue to steal business from London.” He suggested setting up a European economic interest group (EEIG), of legal entities able to operate inside and outside the EU.
Milan and Brexit:
By Graziano Cecchetti
18 November 2016
Milan is, of course, the commercial heart of Italy with three airports, good rail links and only a few hours drive time from Paris, Frankfurt and Geneva together with being the international fashion capital and financial axis of Italy with a highly attractive tax-free zone being proposed as a tempting incentive for businesses, not mention the talent pool that arises from the top rated business and finance Bocconi University as well as housing the main Stock Exchange.
All this makes the city well placed to pitch for any of the pickings that may become available in the wake of the UK’s game changing Brexit vote.  The Prime Minister, Matteo Renzi, is laying plans to attempt to seize the European Medicines Agency as well as the European Banking Authority with a view to relocating the headquarters of both agencies in Milan.
Many organisations are re-considering their strategy following Britain’s intention to exit the EU.  Milan also offers an attractive proposition for employees who are posted to the city for long term secondments in that house prices have not climbed significantly since the 2008 recession created a flat-line in real estate expenditure and prices are not expected to rise anytime soon.  Areas of Milan previously considered to be run down and populated by blue collar workers are now becoming attractive, trendy and affordable.
There are potential flies in the ointment in the shape of the perception of Italy’s judicial system being ponderous and the bureaucracy is deemed to be inefficient.  Also, there are fewer English speakers in Milan than other some major cities in Europe; so there may not be a stampede so much as a steady stream of commerce moving in Milan’s direction as the moment.
18 November 2016
Summary from Italian:
  • During a recent convention hosted by Banco Passadore in Genoa, Fabio Gallia, CEO of the Cassa Depositi e Prestiti bank, asserted that Brexit is a great opportunity for Milan to bring in multinational financial institutions and companies that wish to keep their European passporting rights.
  • Gallia stated that foreign investors are weary of Italy’s perceived opacity; they do not mind rules, but the rules must be made clearer.
La Repubblica
17 November 2016
Summary from Italian:
  • Regional Minister for Universities, Research and Open Innovation, Luca del Gobbo, announced at a recent European Medicines Agency (EMA) conference that Milan is ready to host the EMA headquarters given the institution’s impending departure from London following Brexit.
  • He emphasised that the Lombardy region has just passed a law specifically to revolutionise the field of research and innovation, and that institutional synergy in Milan will make the city the ideal location for the EMA.
Brexit and Europe:
By Silvia Sciorilli Borrelli
18 November 2016
Four major U.S. banks — Goldman Sachs, JP Morgan, Morgan Stanley and Citigroup — have plotted out their exit plans after Brexit and already have one foot out the door.
“Citi is planning to move people to Dublin, while the other three are going to Frankfurt,” one person familiar with the matter said. “At this stage the discussion isn’t about moving thousands of people, just hundreds; numbers will grow if single market access doesn’t happen.” The source said the first to be moved will likely be the banks’ derivatives trading teams.
Bankers say they love London and don’t want to move.
“London is an optimal choice for us. Any other city would be sub-optimal,” a banker at one major U.S. firm said. However, those familiar with the ongoing talks between the City of London, the British government and EU regulators insist things will change sooner rather than later.
“Some jobs will go, others will move and others will be created in Frankfurt or Dublin instead of London — and it’s likely to happen between the first and second quarter of next year,” the source said.
Given the skin financial institutions have in the game and the persisting Brexit uncertainty, none of these firms wants to be portrayed as rushing out the door — especially if they can still lobby the government to get a good enough deal for them to stay.
“Nobody wants to make a bad decision by moving quickly with the amount of uncertainty around. We will be ready to make a permanent decision once we have a better idea of the direction of travel [a hard or a soft Brexit],” Daniel Pinto, JP Morgan’s head of corporate and investment banking, said in an interview.
Bank of England Governor Mark Carney said Tuesday that lenders could start relocating 18 months before the actual British departure from the EU. That would mean September 2017, if Prime Minister Theresa May’s plans proceed on track and Article 50 is triggered early next year.
But according to people close to the banks’ Brexit discussions, relocations could start as early as next March, or June at the latest. Citi did not respond to requests for comment while Goldman Sachs and Morgan Stanley declined to elaborate on their plans.
A spokesperson for JP Morgan said no final decision had been taken, but in the first quarter of 2017 the bank will start “renovating and improving their technology and infrastructure across offices in Europe.” The U.S. banking giant, which was ranked the world’s top investment bank by fees in 2015, has offices in 15 EU countries apart from the U.K.
Likewise, a Goldman Sachs representative said they are still working through the implications of the June 23 vote. “There remain numerous uncertainties as to what the Brexit negotiations will yield in terms of an operating framework for the banking industry. As a result we have not taken any decisions as to what our eventual response will be,” the spokesperson said.
Sources say Goldman is trying to move its balance sheet from the U.K. to Germany before moving its staff, but supervisors are reluctant to take on the risk of operations carried out elsewhere. The ECB declined to comment. Regardless, Frankfurt would be a logical alternative destination for Goldman given it is already its second EU hub, employing 300 people. Goldman has 5,000 employees in London.
For Citigroup, the best option is Dublin where it already employs 2,500 people and has the needed regulatory approvals to carry out business, a source said. The group has denied the claim, according to an Irish news report.
Other EU financial hubs, including Frankfurt, Paris and Milan, are courting the banking behemoths.
“Several elements play in Frankfurt’s favor, and not only the proximity to the European Central Bank and its banking authority … its central position in Europe, an effective infrastructure, a stable political and economic environment, an efficient administration, regulatory stability, an excellent education system and research facilities as well as a good standard of living,” a spokesperson for the German finance ministry said.
On Monday, Thomas Steffen, a senior official at the ministry, said that after the EU referendum they had registered an increasing number of queries from U.K.-based banks. Milan Mayor Giuseppe Sala also said that local authorities are working with the government to create incentives and improve the business environment for banks to set up their headquarters in Italy.
One senior U.S. banker pointed out that both Frankfurt and Milan have significant limitations. “Aside from office space challenges, how do you move entire families, perhaps where the other spouse doesn’t work in banking and doesn’t speak German?” the banker said. Italy’s slow legal system, high taxation and complex labor market doesn’t even put the country on many firms’ radars.
13 November 2016
U.S. bank Citi (C.N) is preparing to move up to 900 jobs from London to Dublin as part of its contingency plans for Britain’s exit from the European Union, the Sunday Times reported.
The newspaper said the bank held a board meeting in Dublin last month, and cited sources in the Irish capital as saying Citi was exploring options for office space there.
“They have been testing the Irish political and regulatory regime on a macro level,” it quoted one source as saying.
Last month the UK head of Citi, which has 9,000 UK employees, said jobs in London’s financial sector would move to other EU countries regardless of what deal Britain strikes on access to the EU’s financial services market.
Financial Times
By Philip Stafford
14 November 2016
A private report by EY has been circulated among UK lawmakers and government estimating 83,000 related job losses over the next seven years if euro-denominated clearing is forced out of London into continental Europe.
The report, seen by the Financial Times, assesses which areas of a prized part of City business would be most affected by the EU adopting a hardline approach to Brexit. The overall figure is not far from the 100,000 job losses previously estimated by the London Stock Exchange Group.
About 31,000 “core intermediaries” of banks, sales and trading desks and interdealer broker jobs, could be lost by 2024, the report says. Another 18,000 could go in related professional legal and accounting services, 15,000 in wealth and asset management and 12,000 at technology providers.
EY said the job losses could also have “a significant domino effect on jobs and revenue”, hitting up to 232,000 throughout the UK.
The LSE, which commissioned the report, declined to comment. EY, which is also the LSE’s auditor, said it was unable to comment on client engagements.
The study is based on a worst-case scenario that the UK loses its access to the EU single market for the contentious business of euro-denominated clearing. London’s dominance in clearing derivatives in particular — even though it is not in the eurozone — has long been a source of contention between the UK and Europe.
Since the UK voted to leave the union, politicians such as France’s François Hollande have threatened to force the business to be processed in the EU and overseen by the European Central Bank.
The report’s forecast assumed the UK would not secure “equivalence” for its clearing regulations, which would also provide single market access to countries the EU considers also operate under equally strong standards.
The threat strikes most particularly at LCH, the world’s largest interest rate swaps clearer and controlled by the LSE. Of the notional $577tn processed by LCH this year, some 150tn of that is in euro-denominated business.
However it has also alarmed the derivatives market globally because banks prefer to concentrate clearing in just a handful of locations. They argue it is a more efficient way to reduce the running costs of customers’ derivatives portfolios.
Clarus Financial Technology, a UK data provider, has estimated cash-strapped banks may need to supply another $77bn in margin for trades if the market fragments.
Some, including Xavier Rolet, chief executive of the LSE, have warned the US would be the main beneficiary if Europe pursued the policy, as banks try to keep their pools of collateral together.
The CityUK, a trade association, has backed Mr Rolet’s assessment. Others have argued the regulatory backlash from Europe is overplayed. New Financial, a London-based think-tank has argued that issuers and investors inside the EU could demand their own existing business arrangements are not affected and they can access London’s huge pools of capital. “Second, any attempt to lockout the UK could also have a big impact on US access to EU markets,” it said.
The ECB has yet to give any indication on its thinking. Last week, Yves Mersch, a member of the ECB’s executive board, singled out stability in repo market clearing as critical to carry out effective monetary policy.
The market is used for secured short-term funding, and is where banks and corporations can price and source collateral to meet margin requirements for derivatives trades. However, most repo market clearing in Europe is already processed through Frankfurt and Paris.
The Star
By Gavin Finch, John Ainger and Alessandro Speciale
15 November 2016
Bank of England Governor Mark Carney urged financial services firms to not make any rash decisions on moving operations out of the U.K. as a European Central Bank official revealed many have already been in touch on the matter.
“They’re making contingency plans, those contingency plans are in various stages of readiness and degree and specificity,” Carney told lawmakers at a Parliamentary hearing in London on Tuesday.
“It is very early days. So planning makes sense; action, in most cases, in general, is precipitous.”
Banks are bracing for the loss of their right to sell services freely around the EU from London and are set to start the process of moving jobs within weeks of the government triggering Brexit, which is scheduled to happen by the end of March next year. British Bankers’ Association head Anthony Browne said last month that banks’ hands are “quivering over the relocate button.”
The ECB’s Single Supervisory Mechanism, which began overseeing the currency bloc’s largest lenders two years ago, is preparing to deal with an influx of requests from banks in the U.K., the vice-chair of the central bank’s supervisory board said Tuesday.
“We have already many banks asking for interviews and meetings so that they can identify where are our pressure points and where our methods differ” from U.K. supervisors, Sabine Lautenschlaeger said in Frankfurt. “For sure we are preparing.”
A spokeswoman for the ECB declined to say how many banks have requested meetings or inquired about a banking license.
Carney, a former managing director at Goldman Sachs, and former Governor of the Bank of Canada, said firms should hold off until they have a better sense of the shape of the U.K.’s future trading relationship. He said a long transition period after the end of the two-year Brexit renegotiation is in everyone’s interests.
“That really informs what businesses need to do today or six months from now,” the governor said. “Because, you transition, you restructure, during that restructuring window. You don’t need to do it in advance, in anticipation of what agreement the government ends up striking.”
If it looks like the U.K. is heading for a so-called hard Brexit then banks may have to accelerate their contingency planning, Carney said.
“If the time to exit is measured in 18 months or less and the degree of exit is viewed as considerable then a number of those firms would take decisions, that’s the best guidance I can give.”
By Zlata Rodionova
14 November 2016
A German minister is meeting representatives of major US banks as Frankfurt increases its efforts to lure businesses and talents from London while the UK prepares to leave the European Union.
European financial centres are hoping to capitalise on foreign banks’ concerns about losing passporting rights, which allow them to sell their services freely across the rest of the EU and gives firms based in Europe unfettered access to Britain.
Volker Bouffier, leader of the German state of Hesse and a senior figure in German Chancellor Angela Merkel’s CDU party, will be meeting representatives of major US banks this week to discuss their options if they wish to retain access to the single market, Thomas Schaefer, the state’s finance minister, said at a conference in Frankfurt, reported by Bloomberg.
In the run-up to the EU referendum Mr Bouffier said he favoured a tough position in negotiations that would deny the UK access to the single market.
He said: “That sort of a concept that the UK still might have a common market with the EU afterwards is in my opinion a pure illusion.”
Germany is not the only country keen to present itself as the best location for banks to set up their EU headquarters.
“Brexit will open new opportunities to euro-area banks,” Vitor Constancio, European Central Bank vice-president, said at the same conference.
London banks provide some $2.5 trillion (£2 trillion) of loans to the rest of the EU and carry out a “big percentage” of euro-dominated transaction, Mr Constancio said.
“The latter is bound to change with Brexit,” he added.
Last month, France set up a special task force of corporate leaders and leaders aimed at luring financial jobs from London as it withdraws from the UK.
Paris’s financial district also unveiled an advertising campaign aimed to underscore the attractiveness of the French capital for business in the wake of the Leave vote with the slogan: “Tired of the fog? Try the frogs. Choose Paris La Defense.”
The news come only a day after Sir Howard Davies, the chairman of RBS, warned that banks could pull out of Britain unless Theresa May secures a post-Brexit transition plan.
He said American and Japanese bank are very concerned at the prospect of a hard Brexit and are drawing up contingency plans.
“They will not wait because they have to make a decision which will allow them to be, to continue to function in the event of a hard Brexit if that’s a possibility.
“So they will not sit back, they are currently making contingency plans and once you’ve got a contingency plan – hey, there is a risk you might implement it one day.”
By John Detrixhe
14 November 2016
CME Group Inc. is examining options in Dublin to ensure its clearinghouse keeps access to European Union customers after the U.K. leaves the bloc, according to people familiar with the discussions.
Managers at the Chicago-based derivatives exchange are weighing stronger ties to Ireland to ensure its London clearing operations aren’t disrupted, but no decisions have been made, said the people, who asked not to be named because the conversations were private. CME’s options in Dublin could include seeking out regulatory licensing or opening offices. A spokesman for CME declined to comment.
U.K. voters’ decision to leave the EU is showing signs of undermining London’s role in financial markets, with New York and Frankfurt frequently named as potential beneficiaries. CME’s deliberations show Dublin is a contender, too. The decision on where to base a clearinghouse, which play a vital role in derivatives by acting as a firewall from failed trading firms, is important because it could shift jobs and the balance of financial power from one city to another.
Clearing re-emerged as a battleground immediately after the Brexit vote, with French and German leaders arguing that euro operations shouldn’t remain in London once the U.K. leaves. Regulations since the 2008 crisis boosted the importance of clearinghouses, requiring many derivatives transactions to pass through them.
About 83,000 U.K. jobs are at risk if euro clearing is snatched away from London, according to consulting and accounting firm EY. Positions that could be impacted include jobs at interdealer brokers and banks, as well as legal, accounting, technology and wealth-management roles. The report was commissioned by London Stock Exchange Group Plc, whose chief executive has said 100,000 British jobs could be lost.
CME started its London-based European clearinghouse in 2011. While its clearing presence is still very small, the internal talks show how executives that previously relied on their London address are jockeying to protect their businesses. Unlike other mega exchanges like Atlanta-based Intercontinental Exchange Inc., which has a clearing presence in the Netherlands, CME’s European clearing business depends on its London location for EU access.
Although they don’t run derivatives clearing, other U.K. companies in the exchange industry — such as currency venue LMAX Exchange and Bats Global Markets Inc.’s London unit — are considering Dublin as a way to keep Brexit from disrupting their businesses. Ireland has been part of the EU for decades and uses the common European currency.
U.K. clearing firms are able to serve EU customers for now because they’re part of the bloc, but they will have to secure authorization known as equivalence after Britain leaves. It took about four years of painful negotiations for the U.S. and Europe to come to an agreement on clearing equivalence.
The over-the-counter derivatives market is massive, and London is a global hub for those transactions. LSE is the majority owner of LCH, which dominates clearing of interest-rate swaps, a market where some $2.7 trillion of derivatives changes hands every day. LCH handles more than 90 percent of cleared interest-rate swaps trades in major currencies. Its swap-clearing unit has more than 100 members.
CME has about 19 clearing members and its clearinghouse is designed to handle contracts tied to energy to foreign exchange and interest rates. Its Chicago operations cleared an average of about 7.2 billion ($8 billion) euros of euro-derivatives each day this year, so far without public objection from European officials.
Financial Times
By Philip Stafford
11 November 2016
The London Stock Exchange Group and Deutsche Börse are entitled to feel that the extra time Brussels will have to assess their deal is a positive sign.
In extending their deadline by 15 days to March 6, European antitrust authorities will be able to test the market impact of the LSE selling off the French clearing arm of LCH, as it proposes. Interested parties will offer their thoughts when a second round of questionnaires arrives in coming days.
The asset — also known by its old brand name Clearnet — is really only available if Brussels approves the megamerger — and the deal is completed. Divesting the asset has always been likely for deal approval. But is it enough?
The EU’s initial investigation flagged up several areas of concern. The deal could hit competing trading venues that depend on LCH for clearing, such as Paris-based Euronext.
Another concern for the commission is the repo market. It is used for secured short-term funding, and is where banks and corporations can price and source collateral to meet margin requirements for derivatives trades.
The cleared repo market also helped preserve market access for banks for funding from some peripheral Eurozone countries during the financial crisis.
An LSE-DB combination would create an entity with a dominant European position in cleared repo and fixed income trades. One segment, the general collateral triparty cleared repo market, would be particularly affected. Deutsche Börse’s GC Pooling product, backed by the Bundesbank, is really the only available rival to LCH’s €GCPlus, which gives access to the Banque de France.
In theory the merged company could also force its counterparties to settle all cleared repo transactions in Deutsche Börse’s Clearstream settlement house.
Selling LCH France has always been part of the exchanges’ antitrust tactics — the LSE has long had frustrations that it cannot make some of the cost savings it has wanted to. The LSE’s banker JPMorgan is assessing interest. Likely potential bidders will discover if they are through to the next round in coming weeks.
Even so, Euronext remains the obvious buyer of an asset it divested in 2003; for growth; to rebuild Paris as a financial hub; and to get a toehold in derivatives clearing.
Analysts at Bank of America Merrill Lynch summed up their third-quarter results this week that: “There’s little to transform the market view on Euronext. Longer term, the company’s success in deploying its M&A potential will be key.”
But more concessions from the LSE and Deutsche Börse may come. For example, the EU flagged up concerns of “a significant loss of competition” in German equities. Deutsche Börse’s Xetra has a 60 per cent market share and the LSE-controlled Turquoise has about 13 per cent. Prising Turquoise away might be painful for the LSE but it is unlikely to be a deal-breaker. There are also rumours that CurveGlobal, the LSE’s new fixed income trading venue, could be up for discussion.
CurveGlobal, Clearnet and Turquoise are all assets from the LSE stable. This is supposed to be a merger of equals. What is Deutsche Börse prepared to part with, and whose deal is this?
The biggest hurdle is still likely to be in derivatives clearing. Like the repo market, in theory the collateral and margin placed at SwapClear, LCH’s interest rate swaps business, could be diverted to Clearstream. Rules on derivatives mean clearing houses have to leave the margin and collateral they hold for traders at a settlement house.
An offer to sell the minor Eurex OTC clearing business is unlikely to sway the commission. If Brussels decides a link between Eurex’s futures and the LCH’s swaps clearing can crimp competition — or that markets for sourcing and the flow of collateral can be cornered — then it may demand that LCH’s SwapClear or Eurex Clearing be hived off too. And for the exchanges, that will almost certainly be a concession too far.
Business Insider
By Lianna Brinded
18 November 2016
Germany’s finance minister Wolfgang Schäuble said Britain should “pay the price” for leaving the European Union and lose its lucrative financial passport.
Schäuble told the Financial Times that Britain should also prepare itself for huge exit costs and tough tax conditions in the event of a Brexit.
He told the paper that euro clearing must be done within the eurozone because “the euro is the EU’s common currency even when not all member states of the EU have this currency.”
“Without membership of the internal market, without acceptance of the four basic freedoms of the internal market there can, of course, be no passporting, no free access for financial products or for financial actors.”
He also added that European financial centres, such as Frankfurt in Germany, are likely to take financial services business and operations because of the loss of its euro clearing business.
In the lengthy interview, Schäuble made some major points that gave an insight into how tough Brexit talks are going to be for Britain:
  • Britain faces a massive bill still — The UK will still be paying money towards the EU’s budget bills for years. According to an analysis carried out by the Financial Times, Britain needs to pay back, at the upper estimate, around €20 billion in commitments to pensions, infrastructure funding, and other transnational projects that are part of its current membership of the EU.
  • There is absolutely no wriggle room on immigration negotiations — He said that Freedom on Movement within the EU is one of the core elements of the bloc and therefore Britain cannot pick and choose what it wants. “There is no à la carte menu. There is only the whole menu or none,” he said.
However, the loss of passporting rights following Brexit is probably the biggest fear in the City of London right now.
If the passport is taken away, then London could cease to be the most important financial centre in Europe, costing the UK thousands of jobs and billions in revenues.
Clearinghouses in London manage risk, acting as a middle-man in swaps and derivatives trades to guarantee the contract in the event that one of the parties involved in the trade goes bust.
The acceptance of English law and widespread use of English language has made London a hub for clearing globally. It controls 70% of clearing involving euro-based deals, according to Sky News. Bloomberg says London processes $570 billion (£460.9 billion, €511 billion) worth of trades daily.
Britain repeatedly had to defend its right to clear trades, given that it does not have the euro. The UK last year won a court battle to continue clearing in London.
However, Prime Minister Theresa May is yet to trigger Article 50 and thereby kick-starting the two-year negotiation process for Brexit. Until then, everything remains the same for Britain.
General Brexit news:
Financial Times
By George Parker
15 November 2016
The government has no overall Brexit plan and could need an extra 30,000 civil servants to deal with the complexity of the task facing the country, according to a memo by Deloitte.
The memo, dated November 7, said that “divisions within the cabinet” were bedevilling Brexit preparations and that officials in different departments were being asked to work on 500 separate related projects.
Chris Grayling, transport secretary, told the BBC Today programme: “It’s certainly not a government report. It’s certainly not something that has been tabled to our committee. I haven’t seen these great divisions I read about in the papers. It’s a complex process albeit with some simple objectives.”
Downing Street said the memo was written by a consultant from the professional services firm on their own initiative. “It does seem this is a firm touting for business, aided by the media,” a spokeswoman said. The author had not “been in Number 10 or engaged with officials in Number 10 since the prime minister took office”.
Later on Tuesday, Deloitte issued an apology. “This was a note intended primarily for internal audiences. It was not commissioned by the Cabinet Office, nor any other government department, and represents a view of the task facing Whitehall. This work was conducted without access to No. 10 or input from any other government departments,” it said.
The document, headed “Brexit Update”, claims to illuminate a Whitehall process where officials toil on multiple workstreams with little guidance about what exit will look like.
The memo suggests it will take another six months before the government decides what it wants to achieve from Brexit or agrees on its priorities. Theresa May, prime minister, wants to start exit negotiations by March 2017 at the latest.
The memo describes divisions between Philip Hammond, chancellor, and Brexit advocates such as Boris Johnson, foreign secretary, and Liam Fox, international trade secretary, according to a report in The Times newspaper.
The document says Mrs May is “acquiring a reputation of drawing in decisions and details to settle matters herself” — an approach “unlikely to be sustainable”.
According to The Times, the memo says: “Every department has developed a ‘bottom-up’ plan of what the impact of Brexit could be — and its plan to cope with the ‘worst case’.
“Although necessary, this falls considerably short of having a ‘government plan for Brexit’ because it has no prioritisation and no link to the overall negotiation strategy.”
The memo suggests there are not enough civil servants to implement Brexit quickly and estimates an additional 30,000 could be required to meet the workload. Mr Hammond may announce more funding for Brexit work in next week’s Autumn Statement.
Referring to the needs of business for certainty, the memo says big businesses could soon “point a gun at the government’s head” to secure what they need to maintain jobs and investment.
The government’s recent concessions to Nissan over its future investment plans in Sunderland suggest that process is already under way.
By John Follain and Flavia Rotondi
16 November 2016
The British government’s Brexit strategy is chaotic, and it’s unacceptable for the European Union to be held hostage to the ruling Conservative Party’s infighting for the next two years, said Italy’s economic development minister.
“Somebody needs to tell us something, and it needs to be something that makes sense,” Carlo Calenda said in an interview at his Rome office on Tuesday. “You can’t say that it’s sensible to say we want access to the single market but no free circulation of people. It’s obvious that doesn’t make any sense whatsoever.”
The remarks by Calenda, a former Italian envoy to Brussels, provide a glimpse of the dismay in some EU political circles at the spectacle they perceive of U.K. government disarray and disagreement on how to approach the country’s departure from the bloc. On Monday, officials denied authorizing a report that another 30,000 civil servants would be needed to deal with the growing workload leading up to the start of Brexit negotiations in March.
“There’s lots of chaos and we don’t understand what the position is,” Calenda said. “It’s all becoming an internal U.K. debate, which is not OK.” The British government “needs to sit down, put its cards on the table and negotiate,” he said.
Article 3
Foreign Secretary Boris Johnson Tuesday ruffled European feathers by telling a Czech newspaper that the U.K. could probably leave the region’s customs union and still enjoy free trade. He also described as a “myth” the idea that freedom of labor movement is a fundamental right in Europe.
The customs union allows members to trade with each other tariff-free, while setting common duties on other nations, yet staying in it prevents the U.K. from striking its own trade deals. The question of participating in it has divided British Prime Minister Theresa May’s government, with Johnson, Brexit Secretary David Davis and Trade Secretary Liam Fox agitating to leave and Chancellor of the Exchequer Philip Hammond counseling caution.
Guy Verhofstadt, the European Parliament’s representative on Brexit matters, posted on Twitter on Tuesday that he “can’t wait to negotiate” with Johnson so he could read him Article 3 of the Treaty of Rome, one of the central compacts of the EU signed in 1957 that established common duties and commercial policies toward third countries.
Dutch Finance Minister Jeroen Dijsselbloem said on BBC Television’s “Newsnight” program that it would be “impossible” for the U.K. to be outside the customs union but still inside the single market, which focuses on reducing non-tariff barriers.
Johnson “is saying things that are intellectually impossible, politically unavailable,” Dijsselbloem said, predicting Brexit would be a “lose-lose situation” for both the U.K. and EU.
‘Great Inspiration’
Calenda told Bloomberg Television that he had “loved” the biography of Winston Churchill written by Johnson, “but on Brexit we are on opposite sides.” Johnson told him during a recent meeting that Italy would grant Britain access to the EU’s single market “because you don’t want to lose prosecco exports.”
“He basically said, ‘I don’t want free movement of people but I want the single market,’” said Calenda. “I said, ‘no way.’ He said, ‘you’ll sell less prosecco.’ I said, ‘OK, you’ll sell less fish and chips, but I’ll sell less prosecco to one country and you’ll sell less to 27 countries.’ Putting things on this level is a bit insulting.”
Calenda said that a balance needs to be struck because the U.K. is a very important partner.
“I respect the British vote, England is to me a source of great inspiration — as you can see from Winston standing there,” Calenda said, pointing to a life-size cardboard cutout of Churchill in his office. The figure holds a sign reading in capital letters: “Tact is the ability to tell someone to go to hell in such a way that they look forward to the trip.”
“Once you make a decision, you need to be clear in execution,” Calenda said.
By Ben Martin
16 November 2016
Brexit is unlikely to lead to a sudden decline in London’s status as one of the leading centres for the global capital markets, the boss of Barclays has predicted.
The vote in June to leave the European Union sparked fears in the City that the UK will quit the single market, which could damage London’s position as an international hub for banking and investment.
Despite those concerns, Jes Staley, the chief executive of Barclays, argued yesterday that while Brexit would lead to a great deal of uncertainty for the banking sector, it was unlikely to result in the City losing its “gravitational pull” in the capital markets overnight.
“The users of capital find the providers of capital, not the other way around, and the providers of capital, by and large, are resident in London and New York,” Mr Staley told the Financial Times’s Banking Summit. “I don’t think London will lose its gravitational pull in terms of management of capital in any reasonable timeframe.”
He added that it is “going to be very hard to break” the grip that London already exerts as a centre for the markets.
There has been speculation that Frankfurt or Paris could emerge as rival European centres to London, although many financiers believe that New York is the city most likely to benefit if banks do decide to move operations away from the UK following Brexit.
Asked whether Barclays was looking at setting up a subsidiary in Frankfurt, Mr Staley said Barclays was “looking at a lot of options” to help offset the uncertainty that the UK leaving the EU will cause.
The Brexit vote, which took financial markets by surprise, was followed earlier this month by the even bigger shock caused by Donald Trump’s unexpected victory in the US presidential election.
Mr Staley, a US citizen who spent much of his career at Wall Street giant JP Morgan, said Mr Trump’s triumph was likely to result in pressure on the US Federal Reserve to pursue tighter monetary policy.
“You’ll see political pressure on the Fed to be less accommodating,” the Barclays chief predicted, adding that “influence on the Fed is going to be another significant consequence of the presidential election”.
He said that there was “something to” the school of thought that the ultra-loose monetary policies of central banks around the world were starting to become less effective.
Mr Trump has indicated that as president he will take a protectionist approach towards trade, in particular a hardline stance on China and Mexico.
At the same conference, Standard Chartered boss Bill Winters conceded that the emerging markets-focused banks would be “in the line of fire” if the US launched a trade war with China.
Mr Winters said that he believed Mr Trump’s expected economic policies were likely to “accelerate” the US dollar’s decline as a global currency.
There have been rumours that Mr Trump has considered Jamie Dimon, the chief executive of JP Morgan, to become his Treasury Secretary, although the banker is not thought to be interested in the post.
The Guardian
By Jill Treanor
17 November 2016
One of the City’s most prized businesses – the way that financial products priced in euros are processed – will not be lost to the remaining members of the European Union as a result of Brexit, according to the ratings agency Standard & Poor’s.
The costs associated with moving the clearing of complex financial instruments to another financial centre means London is likely to remain the home of the £460tn-a-year business, S&P said.
There have been warnings that as many as 100,000 City jobs would be axed if London lost its euro-clearing role, which rival European financial centres were eyeing up jealously even before the result of the 23 June referendum.
An estimated 70% of the transactions using the European single currency are processed in London by clearing houses, which step in between major banks and financial firms on big deals to guarantee transactions. The European Central Bank has argued this business should be conducted in the eurozone.
Last year, however, the Treasury declared victory over the central bank after a European court concluded the ECB did not have the right to make such a demand. The vote for Brexit, though, has reopened the debate about London’s role at the heart of a key part of the European financial sector’s machinery.
“The UK’s referendum vote to leave the EU reopens the possibility that the ECB, supported by other EU authorities, could try to require the clearing of euro-denominated contracts into the eurozone or more likely the EU,” S&P said.
There could be two ways to do this – reawaken the demands about where the business is located, or make changes to the regulations which govern the way standards are set for such operations.
“We believe the first route is likely to be complex, slow and uncertain; the second could be simpler. At this stage, however, we see neither of these options as likely. This is for several reasons, notably the massive extra burden of margin collateral that it could place on market participants,” S&P said.
Clearing houses require collateral to be used as a deposit when they are handling trades so extra demands for collateral would push up the cost of doing business from $83bn to $160bn at the London Clearing House, according to an estimate by financial data company ClarusFT cited by S&P.
20 November 2016
The UK economy must be “watertight” to cope with “sharp” challenges ahead of Brexit, Chancellor Philip Hammond has said, days before the Autumn Statement.
Asked if he would help “just about managing” families, he said more must be done for those who feel they are not sharing in the UK’s prosperity.
Labour’s John McDonnell urged him to scrap benefit cuts.
Mr Hammond refused to be drawn on his plans, but stressed economic “credibility” was key.
He told the BBC’s Andrew Marr Show the UK’s debt was still “eye-wateringly” large and plans must be “responsible”.
Some in Westminster expect Mr Hammond to use Wednesday’s statement – one of two big economic statements of the year – to announce measures aimed at the key group of voters identified by Downing Street as the Just About Managing or JAMs, such as a freeze in fuel duty and measures to encourage saving.
The chancellor said he accepted there were “people who work hard and by and large do not feel that they’re sharing in the prosperity that economic growth is bringing to the country”, adding: “We’ve got to make sure that the prosperity that comes from seizing opportunities ahead is shared across the country and across the income distribution.”
He said ensuring job security for those people was “a key priority”, but pressed on whether he would reverse cuts to Universal Credit, he said many forecasts were “pointing to a slowing of economic growth next year and a sharp challenge for the public finances”.
“There are a range of reasons for that and we’ve got to make sure that what we do is responsible, that everything we do is compatible with building resilience in our economy as we go into a period where there will be some uncertainty around the negotiation over our exit from the EU.”
He added: “I want to make sure that the economy is watertight, that we have enough headroom to deal with any unexpected challenges over the next couple of years and most importantly, that we’re ready to seize the opportunities of leaving the European Union.”
‘Change direction’
Labour says some working families will lose up to £1,300 a year by 2020 if planned benefit cuts go ahead.
And the Women’s Budget Group think tank has claimed that women on average will be £1,003 a year worse off by 2020, compared with £555 for men, with women on lower incomes worst affected.
Shadow chancellor Mr McDonnell told Mr Hammond: “This is money coming out of the pockets of those doing everything that is asked of them – trying to get work, in work, looking after their children, contributing to society.
“Will you change direction? Because if you reverse the cuts to Universal Credit… you will have my support.”
In reply, the chancellor told him: “What I have not heard from you is where you would get the money from to do all these easy options.”
The row comes amid reports that the UK is facing a projected £100bn “black hole” in its finances due to the UK vote to leave the EU.
Asked about continued calls for the government to say more about its aims in Brexit negotiations, Mr Hammond pointed to the “commendable discipline” from other European leaders when it came to not discussing their opening positions and said Prime Minister Theresa May must be given the same “flexibility”.
He added that he was “surprised by the degree to which the cabinet is coming together around a view of the opportunities and the challenges ahead”.
New expressway
Earlier it was revealed that around a billion pounds will be spent on improving England’s roads.
The remainder of a £1.3bn Treasury pot earmarked for infrastructure investment will be split between Scotland, Wales and Northern Ireland, although the devolved administrations can choose to spend that money as they see fit.
But Martin Tett, transport spokesman for the Local Government Association, told BBC Radio 5live the announcement was “a relatively small amount of money in the context of transportation.”
Mr McDonnell said the government was “going back to giveaways and gimmicks”, and re-announcing “press releases we’ve had already”.
Labour, he said, would invest an extra £500bn in the economy over 10 years to boost economic growth by 1-2%, half of which would be leveraged from the private sector through a national investment bank.
And he vowed that a future Labour government would halt tax cuts to the rich and big corporations.
By Rob Merrick
18 November 2016
The Supreme Court today threw a further hurdle in the way of Theresa May’s hopes of a smooth Brexit, when it ruled the Scottish and Welsh governments can intervene.
Edinburgh and Cardiff will be allowed to make their separate cases to the court for the right to have a say over the triggering of the Article 50 notice period.
The decision raises the possibility – albeit thought to be slim – of the Supreme Court agreeing with the SNP that the Scottish Parliament should have a veto over the Brexit strategy.
That would plunge the United Kingdom into a full-blown constitutional crisis, as well as potentially sink the Prime Minister’s exit timetable.
The decision is a big victory for Nicola Sturgeon, the SNP’s first minister, who has insisted Scotland’s voice must be heard after the country voted decisively to Remain.
The Government’s appeal against the High Court ruling that MPs must give their consent to the invoking of Article 50 will be heard, over four days, from December 5.
The decision is expected at the start of January, after which – if it loses – the Government will introduce a short three-line Bill to try to keep Brexit on track.
Ms May has said she will trigger Article 50 by the end of March, beginning two years of formal exit talks expected to conclude with Britain leaving the EU in spring 2019.
Now counsel for the Scottish Government will be allowed to argue that Brexit, as planned by Ms May, is likely to have a decisive impact on the devolution settlement and the law in Scotland.
By Ben Kentish
17 November 2016
Britain faces a £100 billion black hole in its finances because of Brexit, Chancellor Philip Hammond will reportedly tell MPs in next week’s Autumn Statement.
Official forecasts produced by the Office for Budget Responsibility suggest low tax revenues, slower growth and reduced investment after Britain’s vote to leave the EU mean the UK’s budget deficit will soar in the next five years, according to reports in the Financial Times.
Mr Hammond’s predecessor as chancellor, George Osborne, had promised the UK would be in surplus by 2019-20 and made this a core part of his economic policy. But a combination of Brexit, weak growth and recent government pledges to scrap or delay some planned spending reductions mean this is now almost certain to be missed.
Instead, the UK is on course to be running a significant deficit in 2019-20 – and things are likely to get worse still. New forecasts are believed to show the gap between the borrowing estimates outlined in last year’s Budget and the actual borrowing now required getting bigger every year.
Despite the negative outlook, Mr Hammond is still expected to announce new tax cuts for what ministers are calling ‘JAMs’ – people who are “just about managing”.
The Conservatives’ 2015 manifesto committed the government to increasing the tax free allowance to £12,500, raising the 40p income tax threshold to £50,000 and introducing a new law to ensure nobody working 30 hours on the Minimum Wage pays income tax. These changes are expected to cost around £6 billion, while a cut to inheritance tax will cost another £1 billion.
The manifesto also ruled out raising VAT, Income Tax or National Insurance – limiting Mr Hammond’s option of using tax rises to fill the budget black hole.
Independent economic forecasts also paint a negative picture. The Institute for Fiscal Studies warned low growth and rising inflation caused by a fall in the value of sterling after Brexit mean trouble ahead for the UK economy.
It said: “This would leave us on course to miss the now abandoned, but still legislated, commitment to eliminate the budget deficit from 2019–20 onwards.
“This is in addition to the Conservative Government having managed, in just months following the general election, to break both the other two fiscal targets that it set itself.”
As government ministers prepare to restrict freedom of movement to the UK, the IFS added: “Any reduction in future immigration…would make the fiscal arithmetic harder still”.
The pessimistic forecasts appear to be a vindication of Treasury warnings, made before the EU referendum, about the likely economic impact of Brexit on the UK economy.
Then Chancellor George Osborne warned in June that Brexit would lead to £30 billion of further spending cuts and tax rises – a claim that was heavily criticised at the time by the Leave campaign and many Conservative MPs.
Mr Osborne said. “Far from freeing up money to spend on public services as the Leave campaign would like you to believe, quitting the EU would mean less money. Billions less.”
Mr Hammond will deliver his first Autumn Statement as Chancellor at 12.30pm next Wednesday (23 November).
City A.M.
By Hayley Kirton
14 November 2016
A third of businesses have turned their back on investments totaling £65.5bn following the Brexit vote, a study out today has found.
Hitachi Capital and the CEBR (Centre for Economic and Business Research) also found two out of five (42 per cent) large and medium sized companies had cancelled or put investment plans on hold.
Around a fifth (22 per cent) cited the tumbling pound as a reason behind their lack of investment appetite, while a similar proportion (21 per cent) blamed the uncertainty surrounding the access to the Single Market UK businesses could expect to enjoy post-Brexit.
However, Robert Gordon, chief executive of Hitachi Capital, is urging businesses not the be downbeat about June’s referendum result.
“Hitachi is calling on businesses, which are the drivers of the UK economy, to adapt to these uncertain times and seize the opportunity to forge new partnerships globally while continuing to engage with the Single Market,” said Gordon.
“Seventy percent of businesses would be likely to resume investment if uncertainty of the UK’s membership of the Single Market is resolved, but they must remember that access is different to membership and this is how both China and the US are able to engage with the EU.”
Wall Street Journal
By Stephen Fidler
17 November 2016
One way or another, Donald Trump’s election could change Brexit.
For those already anxious about Britain’s departure from the European Union, the election sharply increases uncertainty as the U.K. casts itself adrift from the bloc. Others expect Mr. Trump will prioritize relations with the U.K. and ease the pathway out.
The big economic unknown is over trade. The power of the presidency to set trade policy is extensive and Mr. Trump has said America’s current trade arrangements swell its trade deficit and hurt American jobs and wages.
His election was the final nail in the coffin of the Trans-Pacific Partnership, a trade deal with Asia. He has said he would renegotiate or withdraw from the North American Free-Trade Agreement with Mexico and Canada. And a trade-and-investment deal being negotiated with the EU is now in the freezer, says EU Trade Commissioner Cecilia Malmström.
Mr. Trump has also threatened actions, including possible big tariff increases, to combat what he calls unfair trade from China.
Nevertheless, some pro-Brexit campaigners are excited by his election and say the U.K. could be a beneficiary. They say that Mr. Trump likes Britain—he owns golf courses in Scotland—and that he was a strong proponent of Brexit.
Robert Zoellick, a U.S. Trade Representative under President George W. Bush, said before the election that he had suggested a free-trade agreement with Britain as it left the EU. It “got very good reactions…from members of Congress because they generally like Britain,” he said.
British economist Andrew Lilico says Mr. Trump will want Brexit to succeed and will support a trade deal with Britain. American voters would back a trade deal with Britain and that would make it easy to get it through Congress, he argues in an article for the website Reaction. Mr. Trump favors trade deals with high-wage economies such as the U.K. over low-income economies like Mexico, he says.
The U.K.’s negotiating window is small, Mr. Lilico says: There are only two years before U.S. midterm elections, during which time the U.K. is expected to have its hands tied since, while still a member of the EU, it is widely argued that the U.K. can’t negotiate new trade deals in earnest.
Mr. Lilico doesn’t accept that is a genuine restriction. “It is simply unacceptable, in geopolitical terms, for the U.K. to accept any other country telling us what trade deals we may or may not negotiate, for periods when we are not in a customs union,” he wrote in an email.
If the U.K. can’t get the EU’s go-ahead to do this, he says it should abandon the Article 50 negotiating process—under which it gives two years’ notice to allow divorce negotiations to take place—and just quit the bloc. More likely, he says, common sense would prevail and the U.K. would be allowed to negotiate its EU divorce in parallel with other future trade deals.
Mr. Lilico says he isn’t ranking one trade deal as more important than another. Most economists contend a trade pact with the EU is a bigger priority because the bloc is the U.K.’s most important trading partner.
In September, 51% of British exports went to the EU—in recent years, it has averaged about 45%—and 15% to the U.S., Britain’s largest national market.
Britain also runs a trade surplus with the U.S.—a possible risk for London given that Mr. Trump has suggested America’s trade deficit is bad for the economy—and a big deficit with the EU, especially with Germany.
Germany’s wish to preserve its surplus could help ensure Berlin pushes a favorable trade deal with Britain. But even if economic success is positively correlated with a fat trade surplus—and most economists say it isn’t— Germany’s current-account surplus is forecast to reach a record 9% of gross domestic product this year. Britain’s contribution to it is less than 1% of GDP, so even on this measure its leverage isn’t overwhelming.
That suggests Mr. Trump’s election shouldn’t encourage the government to fixate on a U.S. trade deal at the cost of keeping the EU close.
Nicholas Crafts, professor of economics and economic history at the University of Warwick, also questions whether any agreement signed by Mr. Trump would be advantageous or even acceptable to the U.K. Other economists say such an accord is unlikely to be as extensive as the U.S.-EU deal now on ice.
But the biggest worry is that Mr. Trump’s trade-retaliation plans sets off a trade war and a new era of global protectionism, making new agreements difficult or impossible. Mr. Crafts says there is an outside chance that Mr. Trump’s policies could destroy the World Trade Organization. That, he says, “would seem to complicate Brexit considerably.”

Select Milano Monitor 13/11/2016

Select Milano news:

RBS chairman calls on Theresa May to draw up Brexit transitional plan

The Guardian

By Graham Ruddick and Jill Treanor

13 November 2016

The chairman of Royal Bank of Scotland has warned that banks could pull operations out of Britain unless Theresa May draws up transitional arrangements for the country’s exit from the EU.
Sir Howard Davies said it would be damaging if there was no transitional plan and that banks would have to make decisions based on uncertainty.
Speaking to ITV’s Peston On Sunday programme, he said the US and Japanese banks were concerned by the prospect of a hard Brexit and were drawing up contingency plans.
“I think it is damaging if we don’t get a transitional deal because I think you will then see banks and financial institutions making decisions on the basis of uncertainty.
“They will not wait because they have to make a decision which will allow them to be, to continue to function in the event of a hard Brexit if that’s a possibility.
“So they will not sit back, they are currently making contingency plans and once you’ve got a contingency plan – hey, there is a risk you might implement it one day.”
Davis said the government did not need to reveal its full negotiating position, but needed to reassure the City so Britain did not encounter a “jerky and sudden” departure from the EU.
His comments come as a group of financiers and lawyers based in Milan draw up proposals for a post-Brexit financial services centre for Europe hinged around London and the Italian city.
The aim of Select Milano, an independent organisation endorsed by the Italian government, is not to steal business from London but to help financial services thrive in Europe after the UK leaves the EU.
Its chief executive, Bepi Pezzulli, said one idea that was being drawn up was Dublin as satellite because the Irish legal system was closest to the principles of English law that financiers were accustomed to.
“I don’t think destroying or fragmenting the City of London is a good way forward,” said Pezzulli. “Destroying a cluster is not good. We should instead enlarge the cluster and make London and Milan the head of a new cluster.”
The cluster is a reference to the varied businesses that are based in London, such as banking, fund management and private equity, and the services that build up around them, such as accountancy and legal services.
As a result of Brexit, financial services firms operating out of London are expected to have to shift business – and jobs – to other parts of the EU to enable them to keep access to the “passport” which allows them to sell products across the EU with ease.
Dublin, Frankfurt, Paris and Madrid are among the cities keen to benefit from any exodus from London. There have been warnings, though, including from a Bank of England deputy governor, that New York could end up being the main beneficiary from any loss of business from London.
The Bank of England deputy governor Sir Jon Cunliffe said this month that while it was possible that some activities currently carried out in London would need to move elsewhere in Europe, it would take time for any one financial centre to acquire the “cluster” effect of the UK capital.
Select Milano is targeting one of the largest aspects of London-based business: euro-dominated clearing. Although the UK does not use the euro, London is the centre of €570bn of trading in financial products in Europe’s single currency.
Much of this business passes through the London Clearing House, partly owned by the London Stock Exchange, which is in the throes of a merger with Frankfurt-based Deutsche Börse. The LSE also has links in Milan, owning the stock exchange and operating the Italian clearing house.
Pezzulli, a lawyer, said: “We are not joining a queue to steal business from London.” He suggested setting up a European economic interest group (EEIG), of legal entities able to operate inside and outside the EU.
Sky News (also features on Heart Radio website)
By Mark Kleinman
9 November 2016
A Milan-based agency is offering the City a new “partnership” to help mitigate the potential impact of the UK’s EU exit on its main financial centre, even as some European capitals adopt more aggressive tactics to win business from London.
Sky News can reveal that Select Milano, which has backing from Italy’s finance ministry, is accelerating efforts to create ‎a “financial citadel” in Milan which would become “twinned” with the City of London.
Bepi Pezzulli, Select Milano’s chairman, is in the UK this week to discuss his organisation’s proposals with City ins‎titutions and promotional bodies for the UK’s finance sector.
Under its plans, Milan would create “a legal and judicial ecosystem similar to the City of London” to enable the seamless relocation of “financial markets which for legal and regulatory reasons can no longer be housed in the City”, Mr Pezzulli said.
Under the most extreme scenario of a so-called “hard Brexit”, the UK would lose the passporting system which grants access to all EU member states, and could result in thousands of jobs being moved from the City, according to a series of dire industry warnings.
Select Milano’s approach contrasts with intensive marketing efforts by leading European financial capitals such as Frankfurt, Luxembourg and Paris, all of which have sent delegations to London with a clear message that Brexit will damage the City.
France‎ has established a team aimed at luring UK-based companies which rely on access to the EU, while Paris’s main business district has launched an advertising campaign with the slogan: “Tired of the fog? Try the frogs!”
Sky News revealed this week that‎ a number of major European companies, including Airbus, Eni and Volkswagen, had expressed concern that a hard Brexit could significantly increase their financing costs.
Mr Pezzulli said the common ownership of the London and Milan stock exchanges was one of the factors which strengthened the two cities’ links.
“We want to help London to fix its Brexit problem,” he said.
It is unclear exactly how the co-operation arrangement between London and Milan proposed by Select Milano would be structured, and what level of formal endorsement it would require from British regulators and ministers.
Mr Pezzulli said he would undertake a further roadshow in the UK to promote the idea next spring.
On Wednesday, Milan’s mayor, ‎Giuseppe Sala, told Reuters that he wanted to “offer a series of fiscal incentives which would include cutting down labour and income tax to make Milan a more attractive place to do business”.
Italy is preparing for its own referendum on constitutional reform next month, the outcome of which could affect its own appeal to foreign investors.
10 November 2016
SECRET Milano, an organisation backed by Italy’s finance ministry, has offered to help the City fix its “post-Brexit problem”.
The agency’s chairman, Bepi Pezzulli, who is in London this week, hopes to create a “financial citadel” in Milan which would become “twinnedwith the City of London.
Pezzulli told Sky News yesterday that Milan aims to create “a legal and judicial ecosystem similar to the City of London” to help with the relocation of “financial markets which for legal and regulatory reasons can no longer be housed in the City”.
“We want to help London to fix its Brexit problem,” he said.
No more details of Select Milano’s plans to co-ordinate with the City have been revealed.
City A.M.
By Hayley Kirton
10 November 2016
Brexit could be a great driver for change in financial reform across Europe, according to a group established to promote business relations between London and Milan.
Select Milano chairman Bepi Pezzulli told City A.M.: “Every time you have [a shock like the Brexit vote] you also have the opportunity to create economies of efficiency and do something better.”
In particular, Pezzulli pointed out that Brexit could give Milan motivation to makeover its offering to the finance industry, including creating a “cluster [of] bankers, lawyers, accountants, universities [and] research” similar to “the successful ecosystem of London”.
Unlike some other cities, which seem keen to use Brexit as an opportunity to lure banks away from London, Pezzulli said Select Milano is more interested in building a collaborative platform between the UK’s capital and the Italian city and to help give London firms “a foot on the ground in the Eurozone”.
By Rebecca Perring
10 November 2016
Select Milano, which is support by Milan’s finance ministry, is pushing to create a “financial citadel” in the Italian city which would be “twinned” with London.
It is the latest the join the queue of European nations trying to cash in on the City of London and after Britain leaves the European Union (EU).
Doom-mongering European companies in city’s such as Frankfurt, Luxembourg and Paris, have all sent delegates to London to warn of tough times ahead in the event of a British exodus.
Desperate French officials have launched an advertising campaign in paris with the message, “Tired of the fog? Try the frogs?”.
But Select Milano chairman, Bepi Pezzulli said he wanted “to help London to fix its Brexit problem”.
He said it would create a “legal and judicial ecosystem similar to the City of London” to enable the seamless relocation of “financial markets which for legal and regulatory reasons can no longer be housed in the City”.
But it is unclear how the arrangement proposed by Select Milano will be structured.
Mr Pezzuli said the common ownership of the London and Milan stock exchanges was one of the factors that strengthened the cities’ links.
The idea will be promoted at a roadshow in the UK next spring.
Meanwhile, European business chiefs are getting jitters about Brussels’ hardline stance towards Britain and are now working behind the scenes to ensure that their sectors retain access to the UK market.
Mondo Visione
9 November 2016
For over 400 years the Hansa States  traded with each other in what could loosely be described as an early version of the European Union, without a common currency. In the UK  As the future European financial landscape looks increasingly fragmented, does the Hanseatic league offer any lessons for a future world order.
This is the scene setter for the first panel of the day at tomorrow’s Mondo Visione Exchange Forum. The first panel, “Towards a new Economic Union – A Twenty First Century Hanseatic League” – is chaired by Alderman Professor Michael Mainelli, Executive Chairman, Z/Yen. Professor Mainelli is also chairing the Exchange Forum.
On the panel are:
  • Judith Hardt, Manging Director, Swiss Finance Council
  • Prof. Dr. Hans-Jörg Schmidt-Trenz, CEO, Hamburg Chamber of Commerce
  • Robert McDowall, Chairman, Policy and Finance Committe, States of Alderney
  • Bepi Pezzulli, President, Select Milan
Click bere to read an interview of Bepi Pezzuli, by Sky’s City Editor Mark Kleinman. In the interviiew Sky News reveals that Select Milano, which has backing from Italy’s finance ministry, is accelerating efforts to create ‎a “financial citadel” in Milan which would become “twinned” with the City of London.
Tomorrow’s conference which will be opened by Sir Michael Bear, the 683rd  Lord Mayor of London, is being held in London at The Dutch Church.
Financial Times
By Hannah Roberts
11 November 2016
The archetypal Milanese dish, risotto allo zafferano, gets its distinctive colour from saffron, the expensive spice once used by the city’s craftsmen to give stained glass a golden tint. According to legend, the recipe was invented in the 16th century when a master glazier, working on the cathedral’s monumental windows, added it to the risotto at his daughter’s wedding.
The Milanese still have a Midas touch — a fifth of Italy’s gross domestic product is produced in Lombardy, and in 2015 the region had seven of the top 10 districts in Italy by average income, according to data published by newspaper Il Sole 24 Ore.
The region’s capital, Milan, was less affected by the 2008 global crisis than most parts of Italy. Now it is one of several cities in Europe hoping to pick up some of the spoils should London’s financial institutions shift their operations elsewhere post-Brexit.
The mayor, Giuseppe Sala, immediately leapt on the outcome of the vote, calling it “an opportunity” for Milan and dangling the idea of a tax-free zone as an incentive to businesses. Meanwhile, Italy’s prime minister, Matteo Renzi, who was already making plans to snatch the EU’s European Medicines Agency from London, is also making a play for the European Banking Authority, with the objective of transplanting both headquarters to Milan.
The city is already Italy’s financial hub. It is home to the country’s main stock exchange and Bocconi University, one of the top-rated universities for business and finance in Europe, which help provide a pool of talent. The government has floated the idea of offering passports to Bocconi students from outside the EU.
Milan is also a global fashion capital, with world-class shopping centred on the glossy Quadrilatero d’Oro. Male and female fashion weeks resonate through the city, which pioneered the concept of fashion-themed hotels and restaurants, including venues tagged by Armani, Bulgari, Gucci and Dolce & Gabbana.
Each April tens of thousands descend on the city for the ever expanding design fair, Salone del Mobile. International events such as these contribute to a cosmopolitan nightlife, says Clemente Pignatti Morano of Sotheby’s International Realty. A five-star lifestyle worthy of a much larger city is on offer in Milan, which has 15 Michelin-starred restaurants, he says. “The scene is more diverse and more experimental than other Italian cities such as Rome or Florence. It’s more in line with London. For a relatively small city of 1.3m people, Milan is batting out of its league.”
Last year’s Expo fair brought 21m visitors to the city and was a catalyst for infrastructure projects. A third Metro line was completed and areas such as Navigli, the canal district, received a much-needed facelift.
“Milan may be smaller than Rome, and with fewer international visitors, but it’s more business-focused and forward-thinking,” says Rupert Fawcett of Knight Frank.
Milan has plenty of practical advantages for entrepreneurs: fast train links, three airports and ample prime office space. The city has also been attracting more start-ups, thanks to 2013 legislation that facilitates visas, exempts businesses from certain taxes and allows for more flexible employee contracts.
Davide Dattoli, co-founder of Talent Garden, which runs co-working campuses, says that since the Brexit vote he has received “dozens” of emails from Italians who had emigrated to London but now intended to return to Italy, overwhelmingly to Milan. He also reports interest from start-ups from outside the EU, mainly from Asia, that were planning to move to London but are now considering Milan.
House prices have fallen about 20 per cent since the 2008 global downturn. According to Fawcett, prices have largely flattened, climbing very slightly in 2015, by less than 1 per cent. Pignatti Morano agrees: “The recovery in prices will be very gradual. But there is certainly more faith in the market compared with two or three years ago.”
While it is too early to assess the real impact of the EU referendum, it could help reverse the brain drain in Italy, he says, with some London-based Italians already making offers on properties.
The most desirable areas for international investors include the former working-class, now trendy, Isola and wealthy Brera, where Sotheby’s is selling a three-bedroom duplex for €4.4m.
There are larger properties, too. The agency is marketing an eight-bedroom villa with a terrace and garden in the east-central San Babila area for €12.5m.
New properties are available at CityLife, a former industrial zone now being transformed by the construction of three residential skyscrapers, including one designed by Zaha Hadid. A two-bedroom Hadid penthouse is on the market for €4.3m through Generali Group, the developer.
While Milan scores highly for lifestyle, investors may be put off by the inefficient bureaucracy and slow judicial system. And, according to European Commission data, just 34 per cent of Italians are able to hold a conversation in English, compared with 90 per cent in the Netherlands, a drawback for global companies that want to recruit locally. “It can be hard for expats who don’t speak Italian to get basic administrative things done,” admits Dattoli.
Despite Milan’s charms, Italy’s leaders may have more work to do before we see an investment gold rush to the city.
City assets
Accessibility Milan has three airports and is seven hours by train from Paris and Frankfurt and four hours from Geneva
Regulation In a 2016 World Bank report on the ease of doing business, Italy was ranked 50th out of 190 countries
Infrastructure The Expo last year brought significant investment in transport infrastructure and the site is set to become a technology park
Residential property Redevelopment of brownfield sites at Porta Nuova has provided new apartments
Buying guide
  • Stamp duty on a non-primary residence is 9 per cent. Buyers should also allow for estate agency fees of 3 per cent
  • Deposits are usually 10 to 20 per cent
What you can buy for …
€1m A two-bedroom flat in Porta Nuova
€3m A three-bedroom duplex in a historic building near the city centre
€10m A four-bedroom penthouse with a roof terrace and parking in Brera
By Pamela Barbaglia
9 November 2016
Asian and Gulf financial firms seeking an alternative European base to London after Britain’s vote to quit the European Union (EU) may need to look no further than Milan.
Giuseppe Sala, the recently-elected mayor of Italy’s financial capital, aims to offer them tax breaks in the latest charm offensive by European centers such as Paris and Frankfurt to attract banks and other financial institutions.
“We’re well aware that German and French banks are unlikely to move staff to Italy. But we have seen interest by a wide range of Asian and Middle Eastern investment funds in setting up offices in Milan,” the 58-year-old told Reuters.
Finance firms in Britain fear they will lose their “passports” – licenses that allow them to sell their services across the EU – as a result of Brexit, prompting advertising campaigns by French authorities and promises of labor reforms to draw them to Paris instead.
“We’re looking to offer a series of fiscal incentives which would include cutting down labor and income tax to make Milan a more attractive place to do business,” said Sala.
While Frankfurt, followed by Paris, Dublin and Luxembourg are seen as the most likely cities to grab a slice of Britain’s financial industry if firms shift operations to guarantee continued EU access, Milan is targeting the investors who have been bargain hunting in crisis-hit Southern European markets.
“Our mission is to come back in January with more concrete incentives for international investors,” Sala said. “Chinese and Middle Eastern firms have already signaled their interest in Milan but we want to start holding talks with them early next year when the benefits have all been agreed.”
However, Sala said much of his agenda to lure Chinese banks, Asian sovereign wealth funds and various Gulf investment firms from the City of London will depend on Italy’s vote on constitutional reform on Dec. 4.
Sala needs Rome’s backing to introduce any fiscal reform, but opinion polls suggest the referendum could unseat his close ally prime minister Matteo Renzi, whose 2017 draft budget includes a more favorable tax regime for wealthy individuals.
According to KPMG the basic corporate tax rate in Milan is 31.4 percent, which compares to 20 percent in London.
A “No” vote may also complicate Italy’s emergency rescue plan for ailing lender Banca Monte dei Paschi di Siena. Any failure to rescue Italy’s third biggest lender would dent confidence in the Italian banking system and reduce Milan’s appeal to overseas investors.
“The referendum is a big question mark and we’re concerned about it,” Sala said.
Dubbed “Mr Expo” after working as head of Milan’s Expo world fair between 2010 and 2015, Sala wants to transform the exhibition venue into a tax-free zone and is hoping to win the battle to house two prestigious London-based European agencies, the European Medicines Agency (EMA) and the European Banking Authority (EBA).
The regulators are prized not only for employing more than 1,000 people but also their potential to act as hubs for finance and pharmaceuticals, two of Europe’s most important industries.


Milan is home to about 3 million people in its metropolitan area and the fourth biggest fee-earner in Europe for investment banks such as HSBC and BNP Paribas which have recently moved their local offices to the newly-launched business district of Porta Nuova, owned by Qatar Investment Authority.
Meanwhile, sovereign wealth funds are looking to diversify their investments, while Chinese institutions including ICBC Standard Bank and Haitong Securities are seeking to promote Chinese companies abroad.
While the British government will want to keep such deep-pocketed overseas investors in London to help develop closer non-EU trading relationships, Sala said Milan is well equipped to open its doors to these growing financial players.
The northern Italian city boasts three airports, high-speed train links and is building a subway line from its Linate city airport to Milan’s center.
A series of commercial developments have changed Milan’s skyline in recent years, helping it attract more business visitors. But Sala has his eye on tourism too:
“We have surpassed Rome, there are more tourists heading to Milan than to the capital. This is the place to be.”
Qui Finanza
5 November 2016
Summary from Italian:
  • Finance Committee chair Maurizio Bernardo discusses the resolution put forth to the government which seeks to establish a financial district in Milan post-Brexit. On this, he states: “Given the industrial ties between the stock exchanges of London and Milan, and in light of the attractiveness of the city, the proposal by the Select Milano Committee, as heard by the Financial Committee on 21 September, and as part of its economic diplomacy initiative to consider moving resources and platforms for Euroclearing that are leaving London, is completely supported.”
  • This story is also discussed in Il FoglioIl MessaggeroGiornale di Brescia and Milano Finanza. This story is also summarised by Dow Jones (link not available). Full text available (in Italian) upon request.
Milano Finanza
By Bepi Pezzulli
5 November 2016
Summary from Italian:
  • Fabrizio Pagani of the Ministry of Economy asserted that the new rules adopted by the government will help to attract those in the finance sector to Italy, representing big banks and funds.
  • As financial institutions seek to move elsewhere following Brexit, Italy and Milan can play a part in this transition, particularly considering that they would otherwise likely lose their passporting rights if they were to stay in the UK.
  • Foreign investors remain concerned about Italy’s country risk in regards to public law and the slowness of the justice system. Select Milano has proposed a regulatory environment which would place Milan on similar footing to Dublin and London.
  • The LSE Group’s move to merge with the Deutsche Borse proves that it wishes to keep a foot in the door within the EU market.
  • The European Economic Interest Grouping (EEIG) formation represents the ideal format to attract investors, allowing them to work in a cross-country environment.
  • Further, promoting the practice of arbitration within the proposed financial district would also help investors to avoid the bureaucracy of the country’s legal system.

Brexit and Europe:

Exclusive: Goldman Sachs considers Frankfurt move over Brexit – sources


By Alexander Hübner, John O’Donnell and Olivia Oran

10 November 2016

Goldman Sachs is considering shifting some of its assets and operations from London to Frankfurt, three people familiar with the matter said, as it tries to secure access to the European Union market when Britain leaves the bloc.
The U.S. investment bank is examining the step as a way to qualify for supervision by the European Central Bank, putting some of its operations under the watch of the euro zone’s main banking supervisor.
Coming under the ECB’s jurisdiction should allow it to continue selling its services to clients across the euro zone and wider EU post-Brexit, according to one person with knowledge of the matter.
However, this is uncharted legal territory and the sources said Goldman had not yet taken any decision on the matter.
“Moving under ECB supervision in Frankfurt is one of the options the bank is considering,” one of the people said. Another said Goldman had held talks about such a step with ECB officials in Frankfurt.
The plans being examined would shift Goldman’s European presence toward the center of the euro zone, representing a blow to London’s status as a global financial center – and a coup for Frankfurt, a small city that is Germany’s own finance capital.
A spokesman for Goldman Sachs said there were “numerous uncertainties” about the outcome of Brexit negotiations. “We continue to work through all possible implications of the Brexit vote,” he said. “We have not taken any decisions as to what our eventual response will be.”
An ECB spokesman declined to comment.
Goldman, whose services include broking and market-making in securities, foreign-exchange trading and corporate finance, currently relies on the EU’s “passporting” system. This allows it to sell across the region without setting up shop in each member state, while under the supervision of UK authorities.
But banks’ UK operations are expected to lose their passporting rights after Brexit.
Currently, U.S. banks concentrate the bulk of their European operations in Britain, with 88 percent of their regional employees based there, according to 2014 data from think-tank Bruegel.
A bank such as Goldman Sachs would typically qualify for ECB supervision if it increased the assets of its euro zone operations to 30 billion euros ($33 billion).
Goldman Sachs AG in Germany had assets of 551 million euros in 2015 according to filings for last year. The bank’s overall assets, however, in other entities in Germany and the rest of the euro zone are higher, according to the bank.
Goldman is keeping a floor vacant at its high-rise offices in Frankfurt which could accommodate any additional staff, one of the sources said.
The bank had initially intended to return this to the owner of the tower, where Goldman Sachs has occupied the top floors for more than a decade, but changed its mind after the Brexit vote.
Bankers in the City of London are worried that British Prime Minister Theresa May’s pledge to deliver a full exit from the European Union will mean banks lose their passports or automatic right to do business in the EU. Two years of talks to reach this are due to start in March.
Securing the City’s open access to the EU market, which lobbyists say is worth about 10 billion pounds ($12 billion) a year to the British economy, is crucial for the financial hub of London – a central pillar of the country’s economy.
Goldman Sachs’ Frankfurt office, which is focused on deal-making and selling securities in Europe’s biggest economy, is currently its largest European operation outside London. The bank also has smaller offices in other European cities including Paris, Madrid and Milan, providing similar services.
The bank has a comprehensive banking license in Germany but some services are delivered via London, using the passport system to sell to the wider EU – posing a problem in the event of a “hard Brexit” where Britain has no access to the EU single market.
Goldman Sachs’ assets in Germany are small compared with the roughly $850 billion of assets of Goldman Sachs in London. London is the bank’s headquarters for its operations in Europe, the Middle East and Africa.
Even were Goldman Sachs in Frankfurt to come under ECB supervision, its business in London would still answer to UK regulators.
Irish Times
By Ciaran Hancock
7 November 2016
Ireland looks set to miss out on the European Banking Authority relocating to to Dublin when the UK leaves the EU, Fine Gael MEP Brian Hayes has warned.
Mr Hayes, who represents the Dublin constituency in the European parliament, said Warsaw and Milan are leading the battle to win approval from large member states to secure the EBA, which is based in London.
“It has emerged that there is consensus among some of the larger member states that the preference for the EBA would be to go to either Warsaw or Milan following Brexit, ” he told The Irish Times.
“Milan is regarded as a positive option because it is understood that there was a de facto agreement in place that the three largest member states would always host the three European supervisory authorities separately. With the UK leaving, this would leave Italy as the third-largest state and Milan in position to take the EBA.
‘Tough fight’
“The rationale for Warsaw is that it would be a fair compromise to keep the EBA in a non-euro-zone country in order to foster a strong economic connection between euro and non-euro countries. Giving the EBA to the UK in the first place was largely seen as a concession to non-euro-zone countries that they were firmly part of the EU’s economic architecture. This is a perfectly valid and understandable argument.
“The Government has a tough fight on its hands but it must continue to pursue the message of Dublin as the ideal location. This is a decision that should be taken quickly once Article 50 is triggered.”
The Government made a formal pitch to have the EBA relocated to Ireland on October 25th following a recommendation by the Minister for Finance Michael Noonan. Set up in 2011, the EBA is tasked with achieving a harmonised and integrated approach to banking supervision across the EU.
Its core areas are regulatory policy, supervisory work and risk assessment, consumer protection, and financial innovation. The authority has 156 staff, set to rise to 189 in the coming months. All staff must be citizens of the European Economic Area.
Mr Hayes said moving the EBA to Dublin would send a “strong political message to smaller member states to say that they have a serious role in shaping EU policy”, adding that the EU should not allow larger EU countries to “take all the spoils”.
The Government is also seeking to have the European Medicines Agency relocated to Ireland from London.
By Anjuli Davies
7 November 2016
Global banks are quietly building up their investment banking teams in Frankfurt as the German deals market hots up, boosting the city’s chances of being one of the financial centers to benefit most from Britain’s vote to leave the European Union.
A surge of Chinese investment in Europe’s largest economy and an expected pick-up in merger activity across Germany’s chemical, manufacturing and drugs industries have prompted banks to base more staff in Germany. This is contrary to the usual approach of putting most of their deal-makers in London.
The trend puts Frankfurt in a good position to benefit from any shift of banking activity out of London after the Brexit vote, already bolstered by playing host to the European Central Bank and the EU’s second biggest capital market, city and banking industry officials say.
“Germany is becoming a much more important market because it represents an increasing share of the global banking fee wallet,” Alexander Doll, CEO of Barclays Germany (BARC.L) told Reuters.
When Britain leaves the EU it is widely expected that financial firms based in London will lose their “passporting” rights – an EU system that lets them operate across the bloc but be under the supervision of just one country’s regulators.
That’s prompting other financial centers like Paris, Dublin and Luxembourg to encourage banks, insurers and fund managers to build up outposts in their cities and obtain “passports” there.
Unlike other European countries, Germany has so far refrained from ‘rolling out the red carpet’ to bankers by offering big tax breaks or sending major government officials on big promotion trips, relying instead on a more low-key approach.
With London still expected to remain a major financial center in Europe after Brexit, Frankfurt is marketing itself as a city where firms could base some operations without encouraging a mass exodus.
“Banks are looking to keep the bulk of their operations in the UK but some are hedging their bets on Germany,” said Alex Howard-Keyes, a partner at the London-based international head-hunting firm Alderbrooke.
“If they’re going to have to have a foot on the ground in the euro zone, Frankfurt seems to be the best place,” he said, adding: “Frankfurt is a Brexit hedge plus it’s in the biggest economy in Europe.”
The head of investment banking for Deutsche Bank (DBKGn.DE) in Europe, Middle East and Africa (EMEA) Alasdair Warren told Reuters last month that he planned to base more bankers to cover the industrial sector in Frankfurt from London.
Last month, BNP Paribas (BNPP.PA) appointed two senior bankers to run its EMEA teams focused on the chemicals and car sectors in Frankfurt, roles that had formerly been in Paris.
Several banks and head-hunters who Reuters spoke to in Frankfurt said while there is no major flight out of London to the city, they are placing increased emphasis on the region.
One senior German banker, who declined to be named, told Reuters that in the coming months his firm plans to relocate several EMEA sector coverage teams to Frankfurt, which are currently based in London.
“We believe in the region and we believe in the market,” said the banker, speaking anonymously as the plans have not yet been officially announced. “This wasn’t Brexit related, but I don’t think it harms us in that context.” He declined to give precise details of the plans.
One clear draw for international bankers is that Chinese investors have concluded deals worth more than $10 billion in Germany so far this year versus $3.7 billion in Britain, about 40 times as much as in all of 2015, Thomson Reuters data shows.
Germany represents a much smaller market for investment banking than Britain, it takes about 10 percent of the EMEA fee pool compared with the UK’s 23 percent, but this is expected by bankers to pick up.
“Finally, Germany’s M&A market has woken up,” said a senior Frankfurt-based banker, who spoke on condition of anonymity.
“Germany was lagging behind, but now some of its key industries like chemicals and pharmaceuticals are becoming more active. The environment is a good one right now.”
Britain has said it will open formal talks to leave the European Union by the end of March, but some banks have said they are already starting to look at relocating staff and operations as early as next year in case of a so-called hard Brexit, or loss of single market access.
There are banks which have decided it makes good business sense to make Frankfurt their preferred EU outpost and will start moving more staff there, said Oliver Wagner at the Association of Foreign Banks in Germany, without giving specific examples.
“None of the big ones will wait until the end of negotiations. There won’t be thousands in the short term and Frankfurt can’t cope with that, but these contingency scenarios are now drafted,” Wagner added.
Frankfurt has been pitching itself for years as an alternative European financial capital. It is one of the only cities in Germany to allow the building of high-rise office blocks preferred by big banks.
London, however, is far bigger. For example, U.S. investment banks base 2.6 percent of their European employees in Germany compared with 88 percent in Britain, according to data from country-by-country reports analyzed by think-tank Bruegel in 2014.
Some U.S. investment bankers believe the big winner from Brexit will be New York because some business currently carried out in London would naturally revert to their home headquarters.
But most global banks have a Frankfurt base so that they could obtain licenses to allow them to operate across the EU under the bloc’s passporting scheme.
Frankfurt is home to 159 foreign banks and about 62,300 staff, statistics from Germany’s central bank show.
About 30 banks in Germany currently use London to passport through Europe, of which half already have a subsidiary in Frankfurt, the Association of Foreign Banks in Germany says.
Frankfurt is now quietly making its case behind closed doors to firms across the world.
“Our approach is partnering with those who think about moving business. There won’t be massive marketing like in other countries,” Wagner said. “We do not see politicians from Berlin traveling to London to do any marketing for Frankfurt.”
Promotional activity is being carried out by Frankfurt officials. Tariq Al-Wazir, economics minister in Frankfurt’s state of Hessen, recently made a trip to Japan and South Korea speaking to financial institutions and companies about the benefits of Frankfurt in a post-Brexit world.
But one of the biggest challenges for Frankfurt officials is convincing banks that their city can compete with London as a good place to live. Paris’s newly launched campaign asks: “When did you last book a weekend in Frankfurt?”
By Siobhan McFadyen
7 November 2016
The decision to change its ‘equivalence’ arrangements could have a massive ramifications for businesses worldwide including London post-Brexit.
According to insiders the EU is looking at reworking its existing regime meaning anyone operating outside the member states would have to adhere to strict sets of policies.
The ‘equivalence’ rules cover financial firms operating in countries external to the EU and mandate that they have to replicate regulations in order to meet trading criteria.
They were introduced by politician Michael Barnier before he was appointed as Chief Negotiator in charge of the Preparation and Conduct of the Negotiations with the United Kingdom under Article 50.
A senior source told the FT that “equivalence is not automatic and is not a right” adding that rules are being reviewed.
The equivalence rules cover an array of financial dealings including trading, investment and clearing services.
However they do not cover banking activities such as lending, deposit taking, payments, custody, and private wealth management.
The source added: “They are already reviewing all of this. The equivalence rules were never envisioned for all of the city.”
But some experts have been left scratching their heads over the potential new rules.
Michael Collins of Invest Europe, which represents private equity and venture capital groups, said: “Firms across the world are left wondering what they should expect in terms of access to the EU market.
“Brexit is not relevant for many of them and they don’t want to be dragged into that particular debate. They are saying ‘there is a clear process in the EU legislation; Esma has cleared our jurisdiction for a passport; so what is the problem?’”
While Richard Reid, a research fellow in finance, banking and regulation at the University of Dundee, said: “Even before the Brexit vote, the last financial crisis had fostered an environment of more intrusive regulation.
“Now, with some in the UK arguing that perhaps one way forward for its financial services industry is to benefit from being freed from unwarranted EU legislation, it may be unrealistic to think that gaining EU equivalence recognition will be straightforward.”

General Brexit news:

Theresa May pitches for a ‘long’ Brexit

Financial Times

By Philip Stephens

6 November 2016

A hard Brexit or something softer? Theresa May refuses to admit the choice between a clean break or a continuing close association once Britain quits the EU. Privately as well as publicly, the prime minister dismisses binary alternatives. She prefers to contemplate what you might call a “long” Brexit. Britain will be out of the union within two years or so but nothing too disruptive will happen until many years beyond that.

Mrs May has two political goals. The first is to guarantee that Britain is formally outside the EU well before the election due in mid-2020: “The people voted for Brexit and I delivered it.” The second is to ensure that the costs of severing ties with the EU are not so high as to sink the economy and with it the government’s standing.
Her preference, though nothing yet is decided, seems to be an Article 50 negotiation that has as one of its central objectives agreement on a long transition period — five years or more — in which most of the trickier aspects of the divorce are settled.
The presumption, of course, is that Mrs May retains command of the process. The High Court judgment that parliament must approve the triggering of Article 50 was a reminder that there are other players in the game. The ruling could yet be overturned by the Supreme Court, though on the evidence presented thus far it is hard to see how.
The legal collision was an avoidable accident — a classic example of how politicians keep digging after falling into a hole. Whatever the final judgment, Mrs May will need the consent of parliament. The vote on June 23 said nothing about the nature of the post-Brexit relationship. Splenetic Brexiters denouncing the judges as “enemies of democracy” have forgotten they are supposed to be champions of the parliamentary sovereignty the High Court has underwritten, a point made by the resigning Conservative MP Stephen Phillips.
The smart move now would be for the prime minister to announce a debate before the case reaches the Supreme Court. Talk of protecting the government’s “negotiating hand” is nonsense. Mrs May does not have much of a hand to reveal. The government has yet to reach a settled position on any of the big issues, whether that be access to the single market, membership of the customs union or the extent of national control of the border. This is before it confronts arrangements for security, criminal justice and scores of other programmes.
Ministers are still wrestling with first principles as they wake up to the costs and complexities of unravelling four decades of integration. Mrs May has learnt that pleasing the tabloids with ringing declarations that she will “take back control” comes at the expense of alarming the investors upon whom Britain’s depends for its prosperity.
Thus a promise to dispense with the European Court of Justice (“hard Brexit”, in the phrase banned in Downing Street) has had to be balanced by a promise to Japanese carmaker Nissan that it will not lose access to the single market (soft Brexit). There are countless such circles to be squared. Then there are the voters. Will they be enthusiastic about Brexit a year from now when sterling’s fall is feeding through into cuts in living standards?
The case, then, for playing it long — delivering an Article 50 letter in January sketching only a broad framework (as agreed by parliament) for the future relationship and focusing on a long transition at the end of the two-year negotiating period — is an attractive one.
Mrs May, though, is discovering she has only limited control over the politics — this before she has even started negotiating with the other 27 EU states. They can simply run down the clock. For now, the prime minister says she has no need of the mandate that would come from an early election. Events are beginning to argue otherwise.
City A.M.
By Stewart Hosie
7 November 2016
Let’s be very blunt. The UK government’s failure to have any kind of Brexit plan is potentially catastrophic for business throughout the UK and for the financial services sector in particular.
The UK government’s insistence that it will not offer “a running commentary” on negotiation preparations also means there will be little or no public debate or sharing of information in those areas where it really needs to put up a fight.
This is not a show of strength by the UK government. It is an indication that it has no negotiating position and is terrified of facing up to the consequences of its Brexit policy.
It is also incredibly worrying for industry sectors throughout the UK.
Financial services in general and financial clearing specifically risk a colossal hit as a result of this complacency.
This was made perfectly clear by the chancellor at Treasury questions last month. In reply to a question about the impact on jobs related to euro-denominated clearing from Stephen Timms, MP for East Ham, Philip Hammond said: “in terms of jobs and value… it is a relatively small part of the total.”
But this is to miss the point entirely.
In 2015, the Stock Exchange SwapClear system cleared $533 trillion (yes trillion) of OTC derivatives, “compressing” $328 trillion and saving businesses $25bn of regulatory capital. The figures for 2016 are likely to be higher and the whole market infrastructure supports around 100,000 jobs.
So although euro-denominated clearing is relatively small, unpicking that threatens the whole operation.
As the Stock Exchange says, “attempting to separate out euro clearing from the clearing of securities in 16 other currencies would lead to a fragmented market causing significant cost, reduced liquidity, reduced netting and increased systemic risk.”
And more importantly, “attempts to separate out specific currencies, euros in this case, will result in all products moving to a place outside the UK.”
The key here is “all” products.
The complacent answer from the chancellor overlooks the risk that losing euro-denominated clearing threatens all clearing in the UK.
So the government should swallow its pride, engage fully across the UK with businesses of all types, have public and parliamentary debates about the negotiating position so that it – and the public – are left in no doubt about what is at stake if it gets Brexit wrong.
Over the past few weeks, I, and other SNP colleagues, have met with financial sector companies of all sorts.
Their common theme is that the UK government’s lack of a plan, for passporting, for adequate transitional arrangements and more, is hugely damaging.
Businesses tell us that the time it will take to design and deploy contingency plans to mitigate the worst excesses of a (seemingly now unavoidable) hard Brexit is such that, without certainty quickly from the government, all or some of their operations could be lost to the UK.
Any loss of jobs that results from this – in clearing or elsewhere – will be the direct consequence of this government’s dithering approach.
By Tim Wallace
8 November 2016
Britain’s banks and finance firms need time to prepare for Brexit, making it crucial that the Government quickly develops a plan of action for the sector, the head of the Financial Conduct Authority has told MPs.
Andrew Bailey stopped short of publicly calling on the government to set out its stall before triggering Article 50 –which will kick off the Brexit process. However, he made it clear that more information would be very welcome.
“In life generally, if you take off in a plane, it is quite useful to know where you are going to land,” Mr Bailey told the Treasury Select Committee.
MPs asked the head of the UK’s financial watchdog whether the Government could reduce the City’s uncertainty by making it clear what kind of access to the EU it was hoping to achieve for the the industry.
“It is for the Government and Parliament to decide it. But I agree that, as a feature of life, it is better to leave knowing where you’re going.”
He was joined by the FCA’s chairman John Griffith-Jones who said it is important for businesses to understand the likely relationship between the UK and the EU so that there is “not a cliff-edge” when EU rules are scraped and an unknown set of post-Brexit rules come into force.
The regulators said some sort of transitional setup would help, as it would take a long time for banks to update their IT systems to cope with a change of rules.
Mr Bailey said that it is important the UK retains control of financial services within its borders. This suggests he is not in favour of the UK remaining within the single market and following EU standards without having a say in how those rules are formulated.
“The UK is a major financial centre and there is a need, I think, for a commensurate degree of influence over standards – a world in which we were the taker of standards would be very difficult,” the chief executive said.
Mr Griffith-Jones agreed: “We are in charge of what happens in the UK, we must be able to regulate that well and protect the customer.”
This also presents difficulties. If UK finance firms want to access the EU’s markets from outside the EU, then British regulations need to be deemed equivalent to those of Brussels.
One long-term solution could be to create a set of global financial standards which each government could adapt to local conditions. This would put the UK’s regulations on a par with those of the EU and so enabling all governments to be comfortable with the cross-border provision of services.
“We would be in a better place if we had consistent global standards – a lot better because frankly global free trade in financial services is something worth having, and the nearer we are to global free trade the better,” said Mr Bailey.
He acknowledged that getting to such an arrangement was down to politicians.
Mr Bailey said that global regulators already cooperate on trying to maintain financial stability. The Basel Committee, for example, sets rules on bank capital buffers, which are designed to help banks survive another financial crisis, for much of the world. However, there is far less cooperation in tackling the conduct of financial services companies.
Business Insider
By Ben Moshinsky
7 November 2016
The City is beginning to run out of options.
While Brexit looks set to end its use of the so-called financial services passport to access European markets, the other option, known as equivalence, is also looking shaky.
The Financial Times reported that the European Commission is considering making it harder for non-EU jurisdictions to win equivalence, which is approval for their legal regimes to be considered as tough as the EU’s system, granting financial firms unfettered access.
Replacing full single market access with equivalence was always problematic, even before the EU considered toughening it, because it lacks certainty.
For a start, it is not certain that the UK will win equivalence. While the UK is compliant with EU financial rules, the approval powers have been known to be used politically rather than technically, which does not bode well for a country in trade negotiations with the EU.
The EU also has the power to pull equivalence from a jurisdiction at any time, making it hard for London-based banks and investment firms to plan ahead for periods longer than a few years.
Despite these problems, the UK had hoped that equivalence would play some role in keeping the European doors open for Britain’s financial industry.
Last month Mark Garnier, a UK trade minister who played down these issues, told Bloomberg News that Britain would negotiate a “new model” of financial trade with the EU that would be better than passporting rights, that would involve some type of equivalence.
“If we can create a special hybrid version of that, with a better version of equivalence or a different version of passporting, then that’s what we will try to achieve. What we are not trying to do is fit into an existing box. We are trying to create a new model,” Garnier said.
Prime Minister Theresa May’s government has raised the possibility of a so-called “hard Brexit,” which prioritises immigration controls over economic links such as the European Union’s financial passport, which allows firms to use London as a base to sell their services to Europe.
The loss of membership of the single market could devastate the City of London. JPMorgan and UBS have both publically warned they may have to move thousands of jobs out of Britain if passporting rights are lost and Goldman Sachs is reportedly considering moving up to 2,000 staff. 5,500 UK firms with a combined turnover of £9 billion rely on passporting rights, according to the Financial Conduct Authority.
London Stock Exchange
11 November 2016
A “hard” Brexit in which Britain loses its free access to the European Union market now looks like the most likely outcome of the country’s plan to leave the bloc, ratings agency Standard & Poor’s said on Friday.
Britain will suffer the brunt of the economic impact of Brexit and the effects on the world economy will be more limited, S&P said in its latest update on Britain’s economy.
S&P cut Britain’s top-notch AAA credit rating by two places to AA shortly after the June 23 vote to leave the EU, arguing that the country’s capacity for effective and stable policymaking had diminished.
On Friday, it said that it appeared that Britain’s government had not yet accepted that the EU was unlikely to yield on the indivisibility of its four freedoms – the free movement of people, capital, goods, and services.
“Even if Westminster were to acknowledge the EU position, it is hard to fathom how a rather hard Brexit can be avoided unless both sides become much more flexible than they appear today,” said S&P chief sovereign credit officer Moritz Kraemer.
8 November 2016
The government’s appeal against the High Court ruling that MPs must vote on triggering Brexit will be heard in the Supreme Court from 5 December.
It will last four days, with the decision expected in the new year.
Theresa May has said she is “clear” she expects to start talks on leaving the EU as planned by the end of March.
Campaigners say MPs and peers have to scrutinise the government’s plans beforehand, but ministers say they can decide without this happening.
The High Court ruled last Thursday 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.
Labour has said it will not attempt to delay or scupper this process if a vote goes ahead but pressure is mounting on the government from the devolved legislatures.
The Scottish government is pressing for the Holyrood Parliament to be given a binding vote on Article 50 and will seek to oppose the UK government as it makes the case for its own involvement in the decision.
The Welsh government has also said it intends to intervene in the appeal process to clarify the implications of the judgement for the future of devolution in Wales and the respective powers of the UK executive and the Welsh Assembly.
And Northern Ireland’s top lawyer has said a separate legal challenge to Brexit should “leapfrog” the usual legal process and go directly to the Supreme Court.
Public galleries
The government said it was going to appeal almost as soon as the ruling came out and the Supreme Court has now granted permission – pushing through the process at a far faster pace than usual because of the importance of the case.
After Lord Toulson’s retirement this summer, the appeal will be heard by all 11 remaining Supreme Court justices, led by their President Lord Neuberger.
At the completion of legal submissions, the justices will reserve their decision to a date “probably in the new year”, a spokesman for the court said.
He added: “The Supreme Court will sit in its largest courtroom and make available a live video feed in the other two courtrooms in the building to enable as many members of the public as possible to observe proceedings.
“It should be added that, as with all Supreme Court proceedings, this appeal will be live streamed on our website, so it is not necessary for people to attend the building in person to watch the hearing.”
‘Strong arguments’
On Monday, Mrs May said: “We believe the government has got strong legal arguments. We’ll be putting those arguments to the Supreme Court and the Supreme Court will make its judgement.”
The lead claimant in the case against the government, investment fund manager Gina Miller, has said it is vital that the UK’s negotiating position is voted upon by MPs. She added that for this not to happen would mean ministers were acting like a “tin-pot” dictatorship.
There is some debate about whether a vote at Westminster on invoking Article 50 would require a full Act of Parliament, or whether it could happen much more speedily by MPs and peers agreeing to a resolution – a written motion – instead.
But Brexit Secretary David Davis has suggested a full Act of Parliament is more likely should the government lose its case.
In June’s UK-wide referendum, voters opted by 51.9% to 48.1% in favour of leaving the EU.
By Ross Hawkins 
11 November 2016
Liberal Democrat, some Labour and SDLP MPs have told the BBC they are prepared to vote against triggering Article 50.
Lib Dem leader Tim Farron said his party would oppose it, unless they were promised a second referendum on the UK’s Brexit deal with EU leaders.
Several Labour MPs are also willing to vote against it, despite the Labour Party pledging not to do so.
The government says Lib Dem and Labour MPs are “trying to thwart and reverse the referendum result”.
With the support of Conservative MPs and the support or abstention of most Labour MPs, the bill is well placed to pass through the Commons.
But the opposition of some MPs is likely to embolden critics in the House of Lords.
‘Red line’
The Liberal Democrats have long called for a referendum on the outcome of the government’s negotiations with EU, but only now have they said they will definitely vote against Article 50 if their demand is not met.
Mr Farron, whose party has eight MPs in the Commons, told BBC Radio 4’s Today: “Article 50 would proceed but only if there is a referendum on the terms of the deal and if the British people are not respected then, yes, that is a red line and we would vote against the government.”
For Labour, shadow minister Catherine West, former leadership contender Owen Smith and south London MP Helen Hayes all made clear they were prepared to vote against Article 50 – which begins formal exit negotiations with the EU – if amendments were not accepted.
Former Labour minister David Lammy and shadow transport minister Daniel Zeichner have said they would oppose Article 50. Opposition whip Thangam Debbonaire said she would also vote against it, if a vote were held imminently.
The SNP’s 54 MPs may join them. First Minister Nicola Sturgeon has said they will not vote for anything that undermines the will of the Scottish people, and has previously said they will vote against a bill to write EU provisions into British law to prepare for Brexit.
‘Genuine distress’
Dulwich Labour MP Hayes said she was prepared to defy Labour whips to oppose the measure unless the government promised a second referendum.
She said: “I had somebody in my surgery last week who was in tears because of Brexit and I see genuine distress amongst my constituents about what this path means.
“I would not be representing them if I voted to trigger Article 50 on the basis of no information from the government about the path that they would then take us on.”
In posts on Twitter and Facebook earlier this week, shadow Foreign Office minister Catherine West wrote: “As I have said before, I stand with the people of Hornsey & Wood Green, and I will vote against Brexit in Parliament.”
‘Unconditional’ support
Owen Smith confirmed to Today that if his bid for a second referendum failed, he was likely to oppose the bill.
The SDLP’s three MPs will also oppose the measure.
Ministers said MPs voting against Article 50 would effectively be trying to re-run the referendum in the hope of a “different answer”.
“Parliament voted by a margin of six to one to put the decision on whether to remain in or leave the EU in the hands of the British people,” said Brexit minister David Jones.
“Only the Conservatives can be trusted to respect the outcome of the referendum and make a success of Brexit.”
Last week the High Court ruled Parliament must be consulted about leaving the European Union.
Unless the Supreme Court overturns the judgement in December, a bill to invoke Article 50 is expected in the new year.
Labour made clear its official position would be not to frustrate the process of leaving the EU after a newspaper report said the party leader Jeremy Corbyn intended to force a general election unless ministers caved in to demands.
After the story broke Labour sources said that while it would seek to amend the bill, it would provide “unconditional” support.
Shadow Brexit secretary Keir Starmer said Labour would not frustrate the process and would not vote down Article 50.
However, Labour and Liberal Democrat peers will try to amend the bill in the House of Lords. So too will one Conservative peer – Baroness Wheatcroft.

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