FCA warns banks about moving business from UK to mitigate effects of Brexit
The Financial Conduct Authority sent letters to five major banks in December 2018, warning them about needlessly moving clients to their European subsidiaries – a technique designed to mitigate the potential effects of Britain leaving the EU.
A number of banks have been transferring both employees and clients to new branches in Europe to ensure that they can still provide their services following Brexit.
Some had openly spoken about doing so, with Bank of America and Citigroup acting as early advocates for moving client operations to Paris. JPMorgan have also publicly announced they would consider a move, and Goldman Sachs have identified France as central to its post-Brexit plans.
US bank Citi have already bolstered their Paris office, hiring employees from competitors and transferring senior executives to these European destinations. The bank is expected to move 250 jobs out of London.
A Reuters survey, however, has shown that the number of jobs that were expected to be affected by Brexit has decreased. According to a survey undertaken two years ago, in the event of a “hard” Brexit, it was expected that 10,000 jobs would be moved from London. The survey was repeated last year, and the number in question decreased by almost 50 per cent to 5,800.
The letters, signed by the FCA’s executive director of supervision, Megan Butler, urged the banks to “make the minimum necessary changes required” and asserted that clients “should not be moved out of the UK until the FCA is satisfied”.
The FCA stated that these warnings were necessary to prevent clients being exposed to increased cost and unnecessary risk. Their letter stated: “We are prepared to intervene where we see steps being taken which could expose clients or markets to unacceptable risks.”
A spokesman for the FCA said: “We have emphasised to firms that we expect decisions taken by them in relation to EU withdrawal to be consistent with our statutory objectives, which includes the interests of their clients.”
In response to these letters, the FCA were accused of political bias, and head of the FCA, Andrew Bailey, subsequently appeared in front of the Treasury select committee. He denied any political influence and stated that the letter was “entirely consistent with our objectives and statute to firms”.
He stressed that they wrote the letters “off our own initiative” and that while he understood that banks were under pressure to complete a “big jigsaw puzzle” to become more “self-sufficient”, noted that it was necessary that they ensured changes made were in the interests of their clients.