Jens Weidmann said that London-based banks would lose their right to operate in the 27-nation trading bloc in the event of a so-called ‘hard Brexit’
London’s position as a financial hub will be dealt a severe blow if the UK left the single market, the head of Germany’s central bank has warned.
Jens Weidmann, president of Deutsche Bundesbank, warned that the “hard Brexit” scenario, favoured by conservative eurosceptics behind the ‘Leave Means Leave‘ campaign, would mean that Britain would be stripped of the right to authorise banks and finance companies to operate across the remaining 27 European Union nations.
He added that it would also allow Frankfurt to take business away from London.
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“Passporting rights are tied to the single market and would automatically cease to apply if Great Britain is no longer at least part of the European Economic Area(EEA),” he said in a meeting with a host of European media outlets including the Guardian.
A central benefit for overseas banks that have subsidiaries in the City of London is that these firms have access to the EU market through a “passport”. There have been warnings that this passport would be scrapped if the UK left the EU, giving foreign banks an incentive to move their European headquarters from London to mainland Europe.
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Theresa May has previously been criticised for repeating the slogan “Brexit means Brexit” but failing to set out details of what she wants to gain from negotiations from the EU, but the Prime Minister insists she will not offer a “running commentary” on her strategy.
The Bundesbank president said that retaining passporting rights, was “crucial” for the City of London, warning that without them companies could relocate elsewhere.
“Of course several businesses will reconsider the location of their headquarters. As a significant financial centre and the seat of important regulatory and supervisory bodies, Frankfurt is attractive and will welcome newcomers. But I don’t expect a mass exodus from London to Frankfurt,” he said.
Weidmannwarned that it was far too early to judge the economic impact of UK’s vote to leave the EU.
“Britain hasn’t even applied to leave yet,” he said .
“To assume on the basis of the developments so far that there won’t be any negative consequences would be to draw false conclusions. Great Britain is very closely tied to the EU and Germany. If you reduce these relations to that of a third country, it will suppress economic growth in Britain,” he added..
Banks are discussing whether they will need to move European headquarters to the continent to keep the same privileges, following June’s referendum.
So far no UK bank has officially confirmed it is moving jobs onto the continent but many have underlined they will ultimately do what is best for their clients.
HSBC has confirmed that it will keep its headquarters in London despite the shock decision for the UK to leave the EU.
Goldman Sachs has not yet ruled out moving some of its staff out of the UK. While Andrea Orcel, president of UBS investment bank, has warned the Swiss bank is considering moving its staff to a European country, following UK’s vote to leave the EU.
By Zlata Rodionova, 19th September 2016, The Independent Online