Stay up-to-date with the latest developments in securities law through access to both news and all statutes and regulations. Find relevant corporate filings through a searchable EDGAR database. And...
June 21 — Investment banks would respond to a possible U.K. exit from the European Union by relocating operations to other countries, said Richard Schaberg, head of the U.S. Financial Institutions practice group at Hogan Lovells.
“There will be a big disruption of the activity that is currently taking place, or has historically taken place in the U.K., and it will all eventually leave and have to be housed elsewhere,” Schaberg told Bloomberg BNA in a June 21 phone interview.
Regardless of the outcome, financial institutions such as Citibank, Goldman Sachs and J.P. Morgan “will look to diversify their physical presence over time” given the “instability that clouds the U.K. market going forward,” Schaberg said. Even if the British exit—“Brexit”—vote doesn't prevail, U.K. predominance will be affected.
On the other hand, there probably would be “great benefits” for other European countries such as Ireland, France and Germany because a “leave” vote would move market activity away from London-based operations and onto non-U.K. platforms, Schaberg explained.
If the U.K. does decide to leave the EU, U.K.-based financial institutions might still be granted limited “passporting” rights, Schaberg said. This model would likely mirror that of Scandinavian countries, which are not EU members, but still have access rights.
A key part of the EU’s financial services regime, “passporting” gives member-state banks the ability to conduct business and sell services throughout the EU without having to obtain a license in each country.
If this happens, “the financial services industry can try to salvage a reason to be in London because it would still have some sort of—albeit limited—continued access into the EU regime,” Schaberg said. However, he said his sense from talking with people in the U.K. is that they believe this to be an unlikely outcome.
If the U.K. leaves, he said, it seems unrealistic to expect the EU to be receptive to maintaining a relationship with the U.K. and making the move advantageous so that the U.K.'s financial industry remains viable.
Another major outcome of the vote could be increased momentum towards a common securities platform within the EU. While there are some commonalities in EU countries' regulations, the EU has been trying to establish a single market since the 1960s.
A disruption in the London market might boost support for uniform securities regulation across the EU, Schaberg said.
However, “the caveat to that is, the uniform securities platform was intended to include the UK,” so a vote to leave the EU would create mixed results, Schaberg said. “On the one hand, it may create a little more of a groundswell for pushing a common securities union forward, but on the other hand, the value of that without the UK is diminished,” he said.
If Brexit passes, big banking institutions will be immediately impacted due to the loss of passporting capabilities through London to the EU markets.
However, global industries such as life sciences and pharmaceutical companies—which have seen substantial M&A activity recently—will also be complicated by a decision to leave the EU, Schaberg said. Brexit will probably halt some of that activity, he said.
In addition, London's financial technology market may also see some collateral damage. “London has really taken a premier position in being a promoter of fintech development,” Schaberg said. “To the extent that London is no longer a gateway to the EU, perhaps there might be less allure for London as a starting point for fintech development,” he said.
The Brexit vote is set for June 23.
To contact the reporter on this story: Cameron Finch in Washington at firstname.lastname@example.org.
To contact the editor responsible for this story: Phyllis Diamond at email@example.com.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)