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Slice of the banking industry should go to Frankfurt, says top German banker

Published 13/07/2016

Dr Andreas Dombret said euro clearing services cannot continue to take place in London
Dr Andreas Dombret said euro clearing services cannot continue to take place in London

A significant slice of London's banking industry should be shifted to Frankfurt following Britain's vote to leave the European Union, according to a top German central banker.

Dr Andreas Dombret said euro clearing services cannot continue to take place in London, pinpointing Germany's financial capital as a "more appropriate alternative".

Dr Dombret said banks may also look to set up subsidiaries in countries within the European Union if Britain breaks free of the single market and London-based lenders no longer have access to the bank passporting system.

He said: "I am convinced that, in the medium term, euro clearing cannot take place to the existing extent in London - Frankfurt would be the more appropriate alternative."

Industry concerns following the Brexit vote have centred around the UK's membership of the single market and whether it will continue to have access to the bank passporting system.

Banks and financial firms wanting to trade with a country in the European Economic Area (EEA) must apply for a passport, which allows them to sell their products to any country within the EEA.

However, the European Central Bank (ECB) has warned that Britain would not be able to access the passporting system without remaining a member of the single market and abiding by its rules, which includes the free movement of people.

Dr Dombret said that if Britain was to become a "third country" - a term used to describe nations outside the European Union and the single market - then banks would face a "spectrum of outcomes".

"At the lower end of co-operation, an ordinary third country status would require UK banks and banks from foreign countries to obtain licences for their branches in any given EU country."

He added: " For those foreign banks that currently use their UK subsidiaries as a hub for the European market, the UK serving as a third country would compromise their business models in the EU."

Up to 80,000 jobs could be shifted out of London and into rival financial centres across Europe in the wake of the Brexit vote, according to a recent study by Boston Consulting Group, with Frankfurt trumpeted as the ''most attractive location'' among bankers.

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