Brexit ‘likely to cost London financial services gateway to Europe status’

Brexit ‘likely to cost London financial services gateway to Europe status’

London is likely to lose its status as the “gateway to Europe” for some financial services as a result of Brexit, according to the reported comments of one of Germany’s most senior banking regulators.
Dr Andreas Dombret, executive board member for the German central bank, the Bundesbank, said he expected many UK-based firms to move business units to remaining EU states, including the bulk of euro-denominated clearing services.
Dr Dombret’s comments came in a private meeting to German financiers in Frankfurt, reported by the BBC, in which he warned that London will not be able to make up for the loss of “passporting” rights – which permit firms to market services throughout the EU – by adopting its own equivalent arrangements.
His warnings were echoed by Berlin Stock Exchange chief executive Artur Fischer, who said it was “very, very likely” that the City of London would lose its gateway status if Prime Minister Theresa May pressed ahead with her plan to take Britain out of the single market and European customs union.
“If that happens, it’s very obvious that access from the UK to the European financial market will not be as it used to be and as a result it is very, very likely that that gateway function goes away,” Mr Fischer told Radio 4’s Today programme.
“If as a result we end up without a single market participation, without customs union participation, for the UK in Europe, then there is no other choice than that the gateway function will be moved somewhere else in the EU. That is a logical consequence.
“We just all hope that we will find some middle ground whereby we can avoid that.”
According to the BBC report, Dr Dombret told the Frankfurt meeting that Brexit was part of a trend towards renationalisation that would “negatively affect the well-being of us all”.
“The current model of using London as a gateway to Europe is likely to end,” he is reported to have said.
“I am very sceptical about whether equivalence decisions offer a sound footing for banks’ long-term location decisions. Equivalence is miles away from single market access … Equivalence decisions are no ideal substitute for passporting.”
Dr Dombret said that a “transition period” would ease the pressure of change and reduce what he described as the “earnings risk”.
“Let me say that I expect London to remain an important financial centre,” he added.
“Nevertheless, I also expect many UK-based market participants to move at least some business units to the EU in order to hedge against all possible outcomes of the negotiations.”

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