Deutsche Bank sees UK passport loss

BLOOMBERG

Deutsche Bank AG expects the UK to lose its ‘passporting’ rights, which allows banks to sell their services in the European Union, after the country voted to leave the trade bloc, Business Insider reported, citing an internal
document.
In the confidential note prepared for a July 5 board meeting, Deutsche Bank sees a “first-mover advantage” because a “synchronised move by all major US and UK banks into the euro zone would likely create a significant bottle neck” for EU supervisors, Business Insider reported. While the lender will continue to have full passporting through its Frankfurt headquarters, the London branch may not be able to access clients in the EU, according to the document.
Europe’s biggest banks, already hurt by tougher financial regulation, a trading slump and record-low interest rates, are seeking ways to deal with the fallout of Britain’s decision last month to leave the EU.
While new Chancellor of the Exchequer Philip Hammond has said he’ll fight to support the financial industry in the City of London and retain passporting rights in exit talks, analysts have questioned whether that’s possible. “Passporting is an important feature of the arrangements we have with the EU and in the negotiations that we will have in the future,” Hammond said.
“Protecting those rights for our very important financial sector, which is not just about London, that will be a very important part of those negotiations.”
Senior bankers from JPMorgan Chase & Co’s Jamie Dimon to HSBC Holdings Plc’s Stuart Gulliver have said that a Brexit could cause them to move thousands of jobs from the UK, with Deutsche Bank Chief Executive Officer John Cryan warning the decision would be “negative on all sides.” In the report, Deutsche Bank sees a high probability that the UK will leave the EU, which may restrict movements of skilled workers. This outcome “assumes no bilateral agreement at point of departure” along with “continuity and orderly transition issues,” it said.
“Logically, there is a spectrum of outcomes on the treatment of trade in financial services,” Deutsche Bank said in the note. “Political dynamics in the UK make achievement of full passporting rights for UK-based firms post Brexit unlikely.”
Italian and French financial lobby groups said in a statement on Tuesday that Britain should initiate its exit from the EU by invoking Article 50 of the Lisbon Treaty. Any extended uncertainty about the UK leaving the trade bloc would be “extremely penalising’’ for the economy,
they said.