Brussels is facing a backlash from Wall Street banks over their plan to siphon jobs from the city after Brexit failed to trigger the predicted exodus of top bankers from London.
US bank chiefs plan to raise concerns with the European Central Bank in the coming months, after the latter pressured lenders to move jobs out of the UK by warning they are too dependent on off-bloc operations.
The ECB has carried out a full scrutiny of banks’ trading desks and how they are keeping top bankers off the bloc and risking their eurozone operations to the UK. The desk-mapping review means many will have to step up their operations in the eurozone or face fines, as the ECB warns these “empty shell” structures are a “very real problem”.
But banks are reluctant to move away from London’s deeper liquidity pools and senior executives want to stay in the UK.
A US bank executive said evicting employees and operations from London will ultimately result in worse deals for European customers and cause less efficient and effective risk management.
Another said the ECB was getting “really serious” about forcing more operations into the bloc and said its crackdown would deal a major blow to London. Bosses say there is a risk the move will become politicized as European countries seek to lure staff and operations away from London.
The ECB is said to be in “listening mode” as it awaits banks’ future plans after the review.
The Bank of England is understood to be in regular contact with the ECB to cooperate on the review, but will halt any moves it says are politically motivated rather than driven by regulatory requirements.
The ECB has warned that a fifth of the trading desks surveyed need “targeted supervisory action” and warns that “banks are not yet in full control of their balance sheets”.
According to a blog by Andrea Enria, Chair of the ECB’s Supervisory Board: “The ECB is aware that its expectations could lead to changes in the current structure of some banking groups and intends to apply its policies in an appropriate manner.”
He added: “We want to ensure that new entrants have onshore governance and risk management arrangements that are appropriate from a regulatory perspective to the risk they pose.”
The ECB declined to comment.
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