City digs in as Brussels makes post-Brexit grab for business

British banks are strengthening their joint lobbying efforts to resist Brussels’ attempts to wrestle business away from the City of London after Brexit.

UK Finance, which represents the interests of the sector to the Government and on the international stage, has told staff in an internal memo that it will be building up its capital markets arm as part of a wider restructure under chief executive David Postings, who took on the role in January.

The move comes as the organisation prepares for a rush of extra work as it seeks to influence Britain’s new post-Brexit rulebook and protect London’s role as a global hub.

Insiders said the expanded team will call for unnecessary red tape to be cut and will push back on certain EU proposals, such as a bid by the European Commission to turn non-EU banks’ lightly regulated European branches into subsidiaries.

If enforced, the changes on branches could cost the industry billions. It would also come as a further blow to the City, which was largely left out of the Brexit negotiations and has lost the passporting rights which allowed London bankers to deal freely with EU counterparts.

One insider said: "The UK is evolving its own regime, it’s working on its own regulations which it hasn’t had to do on its own for many, many years – we’ve now got to tackle that."

The EU is already trying to wean itself off its dependence on the City for access to capital markets so that it can rely on various financial centres around the bloc rather than one dominant hub. It has been cracking down on a practice known as “back-to-back” trading, where banks serve EU clients while keeping senior staff and capital in the UK.

In response, the UK has been fighting to retain the City’s attractiveness by promising bankers that Brussels-era laws governing the financial system are to be repealed. 

The Treasury is seeking to ditch the legalistic approach taken when Britain was in the EU, where rules were set by Brussels and Whitehall through legislation and only enforced by regulators. In an 80-page report published last week, the Treasury said that empowering watchdogs to set the rules "will allow for the necessary evolution of the rulebook". 

A spokesman for UK Finance said that "now that we have left the EU, the UK is going through a process of evolving its regulatory regime. As a result, we are investing in our capital markets offering."

Leave a Reply

Your email address will not be published. Required fields are marked *