Banks have already begun to take action to shift operations out of the UK, with the governor of France’s central bank warning on Saturday that Britain’s financial services groups were at risk of losing their right to operate across the EU.
Investment banks have reacted immediately to Britain’s referendum result, with some of the City’s largest institutions approaching regulators to secure licences and lining up executives to relocate.
The big US banks — JPMorgan Chase, Goldman Sachs, Bank of America, Citigroup and Morgan Stanley — have large operations employing tens of thousands of people in the UK. They are now preparing to shift some of this work to cities such as Dublin, Paris and Frankfurt.
The danger to the UK’s financial services sector was highlighted in comments on Saturday morning from France’s central bank governor, who warned that banks would lose "passporting" rights to operate in the EU if Britain leaves the single market.
Fran?ois Villeroy de Galhau said on Saturday it was "paradoxical" to allow the City of London to operate by the EU’s rules and not be a member of the European Economic Area in the manner of Norway.
Lawyers advising US investment banks have warned that the so-called passporting rights they rely on to sell products and services from Britain to EU clients could be partially or entirely abolished depending on the outcome of negotiations over the UK’s exit from the EU.
Many of the US banks have been quietly bulking up European entities outside the UK to which they can transfer some activities, but most of them still lack sufficient licences to carry out many of the operations they at present run out of London.
"If you don’t have a [full EU] licence [outside the UK] then you need to start work right away," said the head of investment banking at a large group.
Jamie Dimon, JPMorgan chief executive, warned before the referendum that as many as 4,000 jobs could be shifted out of the UK. But investment bank boss Daniel Pinto — whose unit employs most of JPMorgan’s 16,000 staff in Britain — told the Financial Times that the US group hoped to keep most of its UK investment bank intact.
Mr Pinto conceded that for some products and services, such as global custody and corporate deposits, it would "need to figure out a way to deal with that", but any moves would be gradual.
Stuart Gulliver, HSBC’s chief executive, had said the bank may move as many as 1,000 of its 5,000 UK-based investment banking staff to Paris if Brexit happened. Other UK banks, such as Barclays, Royal Bank of Scotland and Lloyds Banking Group, may also need to strengthen their European presence outside of the UK.
Jonathan Lewis, head of Japan’s Nomura International, which employs about 2,600 staff in London, said it would have to "wait and see" how things unfolded before making any big decisions about its locations or operating structures.