Banks To London Employees: “Don't Panic”
With Brexit officially a go, banks in Britain are scrambling to undo months of verbal damage, and reassure their London employees over possible Brexit disruptions, a potential shift in jobs to continental Europe, and also talking down warnings made in recent months about leaving the City, some in now dashed hopes of getting a Brexit revote.
It now appears that many of those “threats” were hollow and as Reuters reports, investments banks such as Goldman and Nomura were among those who sent messages to employees in London as they work out how to keep serving clients across the European Union without spooking staffers, prompting employee defections to more hospitable employers. Richard Gnodde, CEO of the European arm of Goldman Sachs, stressed that no big changes were imminent even though he said last week that the Wall Street bank would begin by moving hundreds of staff as part of its “contingency plans” for Brexit. It seems a lot can change in one week.
“All of this work leads us to conclude that although Brexit may well bring some changes to our footprint, a lot will continue to operate as it does today,” he said in a voicemail sent to all London employees’ phones last Friday.
Morgan Stanley also informed employees in Europe that no decisions had yet been made on changes for when Britain departs. Rob Rooney, CEO of Morgan Stanley International, was blunter in updating staffers on the work of a committee comprising senior leaders at the bank which has been making Brexit contingency plans for over a year. “As prudence would dictate, we have been preparing for a worst case scenario, in which we would need to establish a more significant entity within the EU 27,” Rooney said in a memo to staff on Wednesday seen by Reuters. “We continue to monitor the situation closely and, when appropriate, will take the necessary decisions and begin to execute on our plans.”
Cited by Reuters, Gnodde said Goldman Sachs could make long-term decisions only after May’s two years of negotiations to exit negotiations to exit the EU were complete. “We also understand that you will have many questions regarding the implications of Brexit,” he said. “We are sensitive to those concerns, and want you to know that we will share any information on changes that will impact our European footprint as quickly as we can.”
Fearing they could lose top-performing staff, banks are treading carefully as they contemplate moving London-based workers to continental centers such as Frankfurt, Paris and Luxembourg, or paying them off and hiring employees locally.
In a similar message by Japan’s Nomura, the bank said in a message to staff on Wednesday that although it had been actively planning for Brexit, no final decision had been made on either location or timing of any new European entity, according to a source familiar with the matter.
Banks are enacting two-stage contingency plans for Brexit. The first involves relatively small numbers of jobs to make sure the requisite licenses, technology and infrastructure are in place, while the next requires longer-term thinking on what their European business will look like in the future. This is when bigger moves might take place.
According to Reuters, the British Bankers’ Association and the City of London Corporation, which runs the financial district, said in statements it is crucial that after the conclusion of the talks banks retain as much access to the single market as possible.
They both also said that Britain should announce a staggered departure from the EU that would allow British-based banks to prevent market disruption.
Regulatory and banking experts working for the City of London and lobby group TheCityUK are drawing up proposals for a ‘mutual recognition’ system.
Under this, the EU and Britain would broadly accept firms in each other’s financial markets because their home regulatory systems apply similar standards. The aim is for London-based banks to keep serving continental clients, although skeptics say mutual recognition is largely untested globally and would struggle to win approval within the EU.
That said, perhaps in this particular case London banks are more worried than they should be: after all, with banks in Europe hurting and few actively hiring (Deutsche Bank’s “no bonus” policy will hardly prompt massive demand for lateral moves), with the buyside aggressively cost-cutting, and hedge funds shuttering left and right despite all time highs in global stocks, just where are the “panicked” bankers going to go?