As Brexit goes from bad to mind-numbingly-abominable and possibly worse (before getting better?), London finance professionals could be forgiven for thinking they'll be shunted to Frankfurt and Paris at first light in 2019. For some people in sales, this might be the case. But for most people in most front office finance jobs, there will be a few more years' leeway before jobs must be moved en-masse.
The reprieve has been granted by individual governments in Europe, which continue to function amidst the chaos. The German finance ministry, for example, amended the country's banking act to make provision for a no-deal Brexit in late November. France did the same a week or so earlier.
As law firm Clifford Chance points out in a client briefing note, the effect of the amendment to the German banking act will be to empower the German Federal Financial Supervisory Authority ("BaFin") to allow UK-based banks and investments firms which are currently using passporting arrangements to operate in Europe to continue doing so after a hard Brexit. Even if Britain crashes out of the EU, London banks will be able to passport into Germany for up to 21 months.
In France, Clifford Chance says there are preparations to continue passporting arrangements for, "ongoing contracts."
Germany's provisions for a no-deal Brexit won't cover everything. - "Transactions entered into after 29 March 2019 are only in scope if these transactions are closely connected to transactions that existed at the time of Brexit," notes Clifford Chance of the German proposals. The law firm adds that the the German draft law does not define "close connection," nor does it specifically address services provided on a continuing basis. "However, based on the reasoning of the draft law, hedging of pre-Brexit transactions or certain life-cycle events would be in scope," it concludes.
The French arrangements are less complete still and may only apply with certainty to contracts to which banks were, "irremediably committed before Brexit." " - France are trying to grab things, but then they always have," says lawyer Barnabas Reynolds at Shearman & Sterling.
The country-by-country provisions for a no deal Brexit aren't perfect, but senior traders say that in the case of Germany at least, they're sufficient to prevent a scramble to relocate trading businesses in Frankfurt at the earliest possible opportunity. In the case of France, jobs may be moved somewhat sooner (Bank of America traders take note).
Either way, the pressure on banks is less intense than might be presumed. Rachel Kent, head of financial services regulation at law firm Hogan Lovells, notes that if a withdrawal agreement is negotiated, then we will have a transition agreement in place that will last until 2021. And if we don't get a withdrawal agreement, then individual countries' provisions for a no deal Brexit will come into effect. "The main issue that banks have is the loss of passporting, and this delays the point at which this arises," Kent says.
There are plenty of rumours about London banking jobs and Brexit, including some that traders are being asked to sign contracts asking them to move to Europe at short notice and that others are being given until early January to make up their minds. There are also victorious claims that Brexit hasn't led to a wholesale shift in banking jobs out of the UK as initially anticipated. Both look wrong. Jobs will move, but irrespective of the Brexit chaos banks have good reason not to move them just yet.
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