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25 September 2016

Financial Times: City’s special relationship with EU finance system revealed

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Banks that use the UK as a gateway to the EU employ more than 590,000 people, have more than £7.5tn of assets and make annual profits of more than £50bn, according to Companies House data analysed by the FT.

New data collated by the Financial Times drills down further into quite how vital the bridge between the City and the rest of Europe is — for the banks themselves, but also for UK employment, the UK Exchequer and EU capital markets. [...]

The 91 UK-incorporated banks that use passporting — which account for 60 per cent of all incorporated banks in the UK but more than 95 per cent of UK banks by assets and staff — do not disclose how much of their business is done across EU borders.

Nor do the five bank companies that have the “designated firm” status that the Bank of England grants to some parts of large investment banks, including Citi’s global markets business and Merrill Lynch International.

The proportion varies greatly among them. The big three UK retail banks Lloyds Banking Group, Royal Bank of Scotland and Barclays, whose UK-incorporated banks employ 363,000 people and have assets of almost £3.4tn, have passporting rights to almost all EU countries, but do most of their business domestically.

But the City’s investment banks use passporting for more than 20 per cent of total UK activities, according to banking insiders. [...]

The top five US operators have almost £1.5tn of assets and about 21,000 staff in their UK-incorporated banks and designated firms. They also have tens of thousands of additional staff, and significant assets, in branches and other entities which do not file separate financial accounts.  [...]

“Anything that causes London to fragment, such as a loss of passporting, will result in higher costs, lower liquidity, more trapped capital and less-efficient capital markets. Ultimately that’s not just bad for the UK, it’s bad for Europe and the global financial system,” says Mr Rooney, who is also a member of the European Financial Services Chairmen’s Advisory Committee (EFSCAC), a newly formed lobby group, charged with steering the City through Brexit. [...]

Full article on Financial Times (subscription required)

© Financial Times

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