A few American financial behemoths like Citigroup, Morgan Stanley and Bank of America, are trying to assess whether it will be feasible to transfer transactions worth billions of dollars from London to other financial hubs of the world. This move, if it happens, will be entirely due to Brexit. In case this becomes a reality, London will soon lose its position as one of the leading centers of the world for investment banking.
The London advantage until now
London as a financial center has a number of natural advantages. These includes language, a deep talent pool, transport links, timezone and professional services. A few finance specialists ask for a helping arrangement to protect early transactions from the vagaries of Brexit changes. Investment banks on their own are unwilling to shift to the Eurozone as they find it difficult to produce attractive returns within Europe. The Brexit disruption will force them to close down a few UK centric activities. The plans being sketched in Brussels involve making banks establish their holding companies for EU operations. This could be achieved with separate capital pools. All of these will be a blow to London's status as one of the financial capitals of the world. The huge investment banks do a majority of their world business from London. Money is funneled in not only from European clients, but also those present in the Middle East, Asia, the Americas and Middle East. London receives twice the amount of money received by New York. The UK comprise nearly 40 percent of the three trillion per day market for interest rate derivatives. The United States has recently surpassed the island in this measure.
The Brexit will not only move thousands of jobs but will also suck out large amounts of money. Reduction of such money will impact companies on every aspect. The single most aspect-staffing- will also be affected. From the supervisory point of view, the alignment of taking risks, the money and the management matters.
A number of senior executives of banks said they are trying to understand how to manage the business they do with the world outside the UK and EU if they are shift liquidity and capital from London to any European Union city. They are afraid of London being a less effective global booking center if a hard Brexit occurs. There is a distinct possibility that a hard Brexit will slash financial services access between UK and EU markets.