LONDON — European Union authorities will be able to “dictate” to banks to move jobs out of London if the UK loses its financial passporting rights as a result of Brexit, JPMorgan CEO Jamie Dimon said.
“If the EU determines over time that they want to move a lot more jobs out of London into the EU, they can simply dictate that,” Dimon said in Paris on Tuesday, according to media reports.
“If regulators say one day ‘we’re not comfortable with your risk people, your lawyers, your compliance being in the UK,’ they can make us move it,” he said.
“We will be subject to what they do down the road.”
Brexit has the potential to undermine London’s status as a major global financial centre because the City depends on the so-called financial passport to allow banks and other firms to funnel capital to European clients.
Without it, non-EU banks may be forced to set up new European entities on the continent to maintain business in the 28-nation trading bloc, with the terms decided by regulators such as the European Central Bank’s Single Supervisory Mechanism, based in Frankfurt.
Banks are already starting to move jobs from London. US investment bank Citi is preparing for a “hard Brexit” and is in the final stages of deciding where to move operations to maintain links to clients, EMEA corporate and investment banking chief, Manolo Falco, told Business Insider last month.
Meanwhile, Japanese bank Nomura confirmed reports it is applying for a licence to operate in Frankfurt as its European Union base after Brexit.
Banks and European regulators need at least a year, if not longer, to set up fully functioning branches and subsidiaries in Europe to maintain activities. This means that if talks stumble, or the likelihood of the UK leaving the EU without a transition deal increases, banks may be forced to move quickly on plans to boost EU offices.
Frankfurt could prove to be a popular destination for its proximity to the European Central Bank. Earlier this year, Sabine Lautenschlager, vice-chair of the SSM said applications for European licences will be scrutinised closely.
“It is the ECB that grants licences in the euro area. And to be clear: we will only grant licences to well-capitalised and well-managed banks,” she said.
“We will not accept empty shell companies. Any new entity must have adequate local risk management, sufficient local staff and operational independence.”