The UK’s divorce from the EU could leave Europe without a financial centre as banks and investment firms scatter activities to different countries across the Continent, a report has warned.
The Association for Financial Markets in Europe said some European countries might be uncertain about whether to rely on a single European hub.
Last week, British insurance giant Lloyds of London confirmed that is was to set up a subsidiary business in Brussels, prompting questions about whether other financial firms will follow suit.
According to the report, many firms headquartered in the UK are worried that Brexit would remove their rights, leaving them with restrictions similar to non-EU firms when it comes to their cross-border business.
The Association for Financial Markets in Europe, which represents Europe's wholesale financial markets, said this might compel companies to relocate activities into the 27 member states.
The report warned that this could “increase fragmentation and reduce the current benefits available to them of being able to cluster activity in a single European hub”.
According to the study, banks which currently use the UK as a financial centre currently generate around 60 per cent of revenues from the European Union.
The report also pointed out that Brexit could disrupt contracts, particularly for clients holding long-dated contracts such as swaps or loans.
“After Brexit, a bank which had signed a contract may no longer have the required approvals to lawfully perform the services it had committed to,” the report read.
Simon Lewis, chief executive at AFME, said: “Financial stability and market efficiency must be safeguarded during the Brexit implementation process and thereafter."
He described these as “essential public goods” for the European economy.
“Given the tight Brexit timescale dictated by Article 50, market participants and regulators are already having to consider important decisions amid considerable uncertainty.”
katherine.denham@ft.com
