(Recasts with new comments)
By Huw Jones and David Milliken
LONDON Oct 12 Large chunks of London's
financial sector are unlikely to move to the European Union for
the foreseeable future, though some activity could shift to New
York after Brexit, Bank of England Deputy Governor Jon Cunliffe
said on Wednesday.
Frankfurt, Paris, Luxembourg and Dublin hope banks and other
financial firms in London will relocate business to them if
Britain fails to secure adequate access to the single market
after it leaves the bloc.
Cunliffe, however, said the City of London financial
district was a complex "ecosystem" that had taken years to
"What we call London ... I can't see that being replicated
in the foreseeable future in one place in the European Union,"
Cunliffe told a committee of Britain's upper house of
New York, however, already has its own ecosystem to rival
"Some of it, yes, could certainly go (to New York),"
Banks may even decide it would not be economic to transfer
some activities to the continent, meaning they could simply
cease, reducing choice for everyone, Cunliffe said.
French President Francois Hollande has said he wants to see
clearing of euro-denominated contracts like derivatives shifted
to the single currency area. London currently dominates this
Cunliffe said political moves to shift clearing could
backfire and undermine financial stability by fragmenting
Europe's capital market plumbing.
"I think if you do that, then the cost of clearing - and
clearing to me from a financial stability point of view through
central counterparties is a really important reform since the
crisis - you make the cost of that much, much higher," Cunliffe
He said there was "great uncertainty" about the possible
loss of banking activity in Britain.
"To the extent that activities cease to happen in London,
cease to happen at all or move to other jurisdictions in Europe
or elsewhere, to the extent that that happens and the structure
of financial firms has to change, there's great uncertainty
about how much that will have to happen," he told lawmakers.
Senior bankers said on Tuesday they could start moving staff
out of Britain as early as next year if there is no clarity on
the country's access to the European single market once it
leaves the EU.
Britain is due to begin formal divorce talks with the EU by
the end of March, and Cunliffe said the BoE's contingency plans
for dealing with Brexit-related market shocks would remain in
place as that milestone passed.
He warned banking chiefs that as they prepared to move any
operations from London to the continent, they should not lose
sight of risks from day-to-day activities.
The "overall thrust" of mainly EU-sourced banking rules
currently in place would remain after Brexit, Cunliffe said.
(Reporting by David Milliken, Huw Jones and Helen Reid; writing
by William Schomberg; Editing by Andrew Roche)