LONDON — The chairman of US bank BNY Mellon in Europe says major banks are drawing up plans for the worst-case Brexit scenario and warns that no deal for Britain could spark another financial crisis.
Michael Cole-Fontayn, BNY Mellon’s EMEA chair, told Business Insider: “Because nobody knows what the outcome of the negotiations is going to be, the industry has to plan for the most challenging scenario.
“For the UK, this is considered to exclude membership of the single market, with no deal for financial services; at least in the early stages. Planning for this scenario is a sensible course of action, and is what our regulators and our clients expect us to be doing.”
He added: “Both the UK and the EU27 seem aligned in avoiding what is defined as ‘the cliff edge:’ two years of negotiations that culminate without a deal, and with contracts that are invalid and with basic services such as financing, insurance and risk management that can’t be done. However, financial institutions need to plan for that possibility, and for the transition period that would be required.”
Prime Minister Theresa May said earlier this year that no deal is better than a bad deal for Britain in Brexit negotiations. Brexit Minister David Davis repeated in an interview on Sunday that Britain would be prepared to walk away from negotiations with no agreement on Britain’s future relationship with the EU.
We all agree the world does not want to see another financial crisis, and this is something which our industry is encouraging politicians who are at the negotiating table to keep in mind.
Cole-Fontayn, who is also chairman of industry group the Association for Financial Markets in Europe (AFME), suggests this could be disastrous for financial stability. He said financial markets need to be able to continue to function across borders and regulators across both the UK and EU must continue to talk to each other.
He told Business Insider: “We all agree the world does not want to see another financial crisis, and this is something which our industry is encouraging politicians who are at the negotiating table to keep in mind.
“We all want to be able to provide Europe’s 500 million citizens, savers, investors and pensioners — both current and future policyholders — with the stability they need and rightly deserve. We experienced a devastating financial crisis recently, and we are keen that it does not happen again.”
He added: “It’s certainly our hope and belief that regulators will be able to continue coordinating, communicating and sharing information. It’s our plea that the politics will allow for that — we hope that is the case, but we can’t know for sure until the negotiations are complete.
“This is why The Bank of England is making sure we all have contingency plans that don’t assume any regulatory cooperation. Safety and resiliency of the financial system is absolutely vital.”
Cole-Fontayn said BNY Mellon was already well positioned to cope with Brexit, with offices already up and running in Dublin, Paris, Frankfurt, Milan, Amsterdam, and Luxembourg.
Cole-Fontayn told Bloomberg earlier this month that BNY Mellon, which employs around 5,000 people in the UK, will need fewer than 20 extra roles in Europe as a result of Brexit. He told BI: “Brexit is a natural opportunity to expand roles within our European footprint, should we deem it necessary to do so in the future.
“However, our business model and our operating model already provide us with a great deal of stability and flexibility in this space, and our assessments confirm that we already have the licenses, the legal entities and the talent in the right locations.”
More from Oscar Williams-Grut:
- TransferWise launches new business account and plans foreign exchange card
- Stripping Britain of a €930 billion daily business after Brexit could cost investors €100 billion
- Startup bank Tandem names new CTO after former tech chief leaves for Dubai
- HSBC tech chief on digital challenger banks: ‘We are building similar stuff ourselves’
- Eve Sleep’s IPO is a window into the crazily competitive, high-growth world of online mattress sales right now
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.