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19 September 2016

The Guardian: Hard Brexit will cost City of London its hub status, warns Bundesbank boss

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Passporting rights to operate across EU will be lost if UK does not at least stay within the European Economic Area, says Jens Weidmann.

The “hard Brexit” option – favoured by some leading Conservative eurosceptics – would mean banks would automatically be stripped of their ability to conduct business across the EU and open the door for Frankfurt to take business away from London, the Bundesbank president, Jens Weidmann, said.

In an interview with the Guardian, Weidmann emphasised that banking “passporting rights are tied to the single market and would automatically cease to apply if Great Britain is no longer at least part of the European Economic Area” (EEA).

The question over passporting rights is a crucial issue for Britain’s financial services industry since they allow firms to use London as a hub for serving clients from across the EU, without the need for licences in individual countries. Its importance appeared to be emphasised by data published on Sunday showing that foreign banks with affiliates in the UK account for a large share of international banking activity in London.

In the wake of Britain’s vote to leave the EU, the foreign secretary, Boris Johnson, had tried to assure US banks that the UK would retain its passporting rights even if it left the EEA, as many of Johnson’s allies are pushing for.

But Weidmann appeared to quash such a compromise, describing passporting rights as “crucial” for the City of London because a lack of them could force companies to relocate to financial centres on the continent such as Frankfurt.

“Of course several businesses will reconsider the location of their headquarters. As a significant financial centre and the seat of important regulatory and supervisory bodies, Frankfurt is attractive and will welcome newcomers. But I don’t expect a mass exodus from London to Frankfurt.”

In a wide-ranging interview, the Bundesbank president warned of reading too much into signs that the British economy had already weathered the turbulence of the Brexit vote. “Britain hasn’t even applied to leave yet,” Weidmann said when asked whether the remain camp’s “Project Fear” had been exposed as scaremongering.

“To assume on the basis of the developments so far that there won’t be any negative consequences would be to draw false conclusions. Great Britain is very closely tied to the EU and Germany. If you reduce these relations to that of a third country, it will suppress economic growth in Britain.” [...]

Full article on The Guardian

© The Guardian

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