The EU could be in trouble with London’s largest banks. It claims that they have not sent enough staff members to the Continent since Brexit.
Legal sources have warned that the European Central Bank is threatening to remove their EU banking licences – which they need to operate – if they don’t move more staff and resources to the bloc.
According to a source within the ECB, such a step would be taken only if banks do not cooperate.
Warn: The European Central Bank has threatened to cancel the EU licensing of UK banks
Britain and the EU have agreed to sign a memorandum of understanding by March 31, on financial services, as part of the post Brexit agreement for the City. The memorandum is still to be signed.
To continue servicing their European customers, global banks with London headquarters, including JP Morgan and Goldman Sachs, established subsidiaries in Europe.
To ensure that these EU-affiliated subsidiaries were profitable, the ECB ordered companies to transfer assets and workers to it.
Sources claim that many bankers refuse to move out of London. London is widely considered a major financial hub. Covid was also said to have obstructed plans by those who had been planning to shift some of their work week to Paris or Frankfurt.
According to a senior lawyer, Sunday’s Mail interview revealed that the ECB is in a position where it requires you to fulfill your growth commitments. [EU operations]. We’ll take your license away if you do not comply. The movement of top staff is something the ECB is increasingly focusing on.
Barney Reynolds, partner at law firm Shearman & Sterling, said: ‘The ECB is definitely pushing for more senior bankers to move to the EU. Banks are being encouraged. The EU is always trying to take more. The EU has no legal basis to do so.
Edouard Fernandez-Bollo a member of ECB said in a recent speech: ‘Empty Shell Institutions are not accepted in the euro zone.
He stated that banks need to allocate adequate capital and sufficient “high-quality resources” for risk management.
EY expects to release tomorrow a report that will show that less than 8000 people were moved from London’s financial sector to the EU.
Covid is likely to have also impacted financial service firms, as they are unlikely to have moved any additional employees or assets to the EU in this past year.
Oliver Wyman, a consulting firm, predicted in 2017 that a “hard” Brexit would result in 35,000 new jobs outside the UK for financial services.