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23rd Jan 2022

France: London cannot remain EU banking hub

  • Sapin (l): "Those who think that after Brexit things can be just as before are making a major mistake" (Photo: consilium.europa.eu)

French finance minister Michel Sapin has said London cannot be the EU’s banking hub after the UK leaves the bloc.

“The first marketplace for euro-exchanges is London. Almost all the important chambers are in London. Is this a sustainable position after Brexit? I don’t believe so”, he said at the Tatra summit, a conference organised by the Globsec think tank in Bratislava on Friday (28 October).

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“Be it a hard Brexit or a soft Brexit, this cannot go on after Brexit. Those who think that after Brexit things can be just as before are making a major mistake”, he said.

The UK aims to start talks with the EU on the terms of their divorce at the end of March.

The British government has said it wants access to the single market, but also to curb EU immigration.

EU leaders have said it cannot have both, with one potential casualty being the loss of “passporting rights” for London-based banks to do business in Europe.

Dublin, Frankfurt, Milan, and Paris - other EU financial hubs - could gain from a bank exodus from London.

Despite his comment on post-Brexit changes, Sapin on Friday said he still wanted to “cooperate” with the City of London in future.

“Are we going to go into a war with London? Of course not”, he said.

Zdenek Turek, the CEO of Citibank Europe, a Dublin-based bank with operations in 21 EU countries, said at the Tatra congress that Brexit uncertainty was causing headaches.

“Everybody is looking at the worst case scenario because there’s no lead from the politicians on what’s going to happen”, he said.

“Today, in every bank of a certain size, you have a department looking at what might happen if there’s a complete breakdown of passporting”, he said.

He said a hard Brexit would lead to higher costs for banks and their clients.

He also said the idea that Brexit talks could settle the issues in just two years, as planned, was unrealistic.

“You need a transition period, at least in our industry … There’s a danger of a cliff effect - the old agreement is gone and the new one is not in place yet,” he said.

The Tatra event saw a broader debate on the future of eurozone integration, including banking union, after the UK has left.

European house

German finance minister Wolfgang Schaeuble said in Bratsilava that “our European house” was “badly in need of repair”.

He said there was no appetite to create a fiscal union, but called for eurozone integration to continue at a pragmatic level.

“We should continue with [integration of] the banking sector, push forward on capital markets union, and stick to the fiscal rules that we have agreed”, he said.

EU finance commissioner Pierre Moscovici said that, like Schaeuble, he was both a “federalist” and a “realist”. He said that fiscal union is “not for tomorrow”.

Ivan Korcok, Slovakia’s EU affairs minister, said that political elites and the general public in central Europe wanted to go further on euro-integration.

Citibank’s Turek said the business community wanted bank harmonisation, EU budgetary discipline, and labour market reforms to make it easier to sack people for the sake of competitiveness.

Recalling Schaeuble’s “European house”, Turek said: “We’ll all have to move and live in that house and give up our little houses where we live today … national sovereignty will have to be further surrendered”.

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