Economic impact of Brexit: special focus
What will Brexit mean for the UK, and for the rest of the EU? Bankers, traders, corporates and economists prepare for the economic impact of Brexit.
The news that Garth Ritchie, head of investment banking at Deutsche Bank, is being paid €250,000 a month for extra responsibility 'in connection with the implications of Brexit' has been condemned in Germany, where politicians and union leaders are preparing to oppose a potential merger with Commerzbank and associated job cuts.
Back-office hubs are at greater risk than London.
Branch closures in the name of digitalization, on top of wider woes in the retail sector, could exacerbate the kind of community breakdown that led to Brexit.
The damage done to mid-cap equities coverage by unbundling research is ever harder to ignore. It will not be easy to lower this self-imposed barrier to improved capital-markets access for fast-growing businesses in Europe.
The city is wooing banks from London in an all-too-literal manner.
As if Europe's resolution regime did not have enough problems to tackle, the imminent departure of the UK from the European Union has added another problem – one of the politicians’ own making.
The UK financial establishment says it can cope if the UK crashes out of the EU, but behind the scenes panic seems close.
A boutique broker renowned for the accuracy of its currency forecasts has warned that a no-deal Brexit could see the pound fall to parity with the euro by the middle of next year.
Investor safety has come under close scrutiny since June, resulting in a small but discernible decline in the global average risk score, halting a four-quarter improving trend.
Banks and non-banks are battling for market share in a property market that finally seems to be slowing down in the face of multiple headwinds.
Brexit-sparked competition from US banks a good thing, ECB supervisor says; Italian populism ‘a burdensome tax’ on banks.
US asset manager sets sights on Germany with new direct lending fund.
While analysts focus on net interest margins and the turning credit cycle, there is an extraordinary risk hiding in plain sight.
Global risk subsided in the first half of the year, according to Euromoney’s country risk survey, with confidence in Europe maintained and commodity producers benefiting from better terms of trade. Yet with US interest rates rising, and Brexit, Russia and protectionism risks prevailing, investor prospects have more recently become uncertain for the remainder of 2018.
With less than 10 months to go until the UK formally leaves the European Union, most FX venues remain content to wait for the outcome of negotiations around key issues such as financial passporting before confirming their future strategy.
LHV looks to expand cryptocurrency customer base; UK head sees opportunities for EU banks in Brexit.
In the post-Brexit vote uncertainty plaguing the UK, it is no surprise that mid-market bank lenders are being more cautious.
Global cooperation between regulators must be preserved after the UK leaves the European Union, says Kay Swinburne.
Social media influencer of the year: Blankfein and the Brexit tweets.
UK banks scraped through the latest stress tests with no need to raise capital, but add a disorderly Brexit onto recession and overseas investor flight, and they could face serious trouble.
Banks in the eurozone will not be able to count any of their English-law bail-inable debt toward their pending requirements if no Brexit deal is reached between the EU and UK – translating into some €126 billion of subordinated bonds.
Clients are asking banks now how they will continue to operate their cash-management facilities after the UK leaves the EU, regardless of the outcome of negotiations.
Considering the impact of both the Trump administration in the US and the Brexit negotiations in the UK, Marquard and other panellists agreed that a short-term retreat from globalization could threaten the interconnectedness of the global financial system.
Brexit won't happen...
A further year of coming to terms with the Brexit vote in the UK has hardly eased worries about its impact – if anything, fears being expressed privately are greater now than before, even if the public messaging is mostly a breezy get-on-with-it mentality.
African economists and bankers expect more advantageous trade terms, possibly with both the UK and the European Union, after last year’s shock decision to leave.
Frankfurt, Paris and Dublin all hope to pick up at least some of the spoils of Brexit, but replicating the advantages of London and the UK is not so easy.
The banking industry has stopped fretting about a full-on Brexodus of jobs to other EU cities outside of London and started worrying about what comes next.
With Brexit now upon us, as warnings abound of the damage it will inflict on the UK economy and the country’s financial sector, Euromoney follows its instincts and puts two British banks on our short list to be recognized as the world’s best.
From strong and stable to weak and jittery, the pound bore the brunt of the surprise UK general election result, but despite May’s quick move to form a working coalition government, sterling will likely stay soft, say analysts.
The one-year anniversary of the UK vote to leave the European Union is fast approaching and still most banks clustered in London haven’t disclosed plans to relocate staff to deal with EU clients, senior management to answer to regulators, or even any support staff.
Continental European banks have long looked with envy over the English Channel – more than ever since the eurozone crisis – but with UK banks facing Brexit and a more advanced economic cycle, and as a degree of inflationary confidence returns to the eurozone, could the tables be turning?
By the time we get to the German federal elections in September, we should have a new pro-EU French president and a UK prime minister looking for a soft Brexit deal and willing to negotiate.
"The risk scenario is if the Conservatives lose their majority, plunging the UK into political chaos during the Brexit negotiations, which would then be delayed."
Economic and political analysts are becoming more concerned about the UK’s future access to capital markets after Brexit, a fear that helped push the UK down one place on ECR's combined country risk scorecard in the first quarter of 2017.
Euromoney’s country risk survey shows disparate risk trends emerging in Q1 2017 as leading economists and political experts reassess their views on asset safety in the wake of changing commodity prices, currencies and populist political trends.
Claims of FX derivatives mis-selling have spiked since the EU referendum, although the limited number of court cases brought to date indicates the difficulties faced by companies who feel they were sold products not appropriate for their hedging requirements.
Williams & Glyn fits a pattern of how mishandled dealings with the UK government and the EU have overshadowed the banks’ wider recovery. Now, as the end to an epic restructuring nears, Brexit begins.
The populist surge is being restrained for now, but several factors are likely to drive up sovereign bond yields in Europe.
As Europe improves, corporate investment is rising – with one glaring exception.
Conventional wisdom says the UK’s forthcoming exit from the European Union will be bad for the pound, but after a year in which the UK currency has lost a fifth of its value on a trade-weighted basis, there are some in the FX markets who say the worst impacts of Brexit are already priced in.
Bankers in the UK have little if any appetite to row back on a decade of regulation they are just about getting used to.
It is not only banks that are wearily trying to assess the impact that the UK leaving the EU will have on their businesses – private equity firms are getting increasingly concerned too.
There may be yet some good news for UK based financial services in the wake of Brexit, if the Economic and Monetary Affairs Committee (Econ), a powerful committee within the EU Parliament, gets a draft resolution now being considered through to a plenary vote in its current form.
On a day many expected would see the pound sink to new depths, the currency instead responded to news that the UK would be leaving the single market by posting its best performance since the referendum – but whether the day marked a turning point or a mere relief rally, nobody can be sure.
With the sizeable majority voting no to political reform in the Italian referendum, the anger vote has claimed its next victim – Italy. The dominoes of Brexit, Trump and now Italy continue to fall.
ECR’s crowd-sourcing survey shows global risk rising in 2016, with leading economists and political experts revising their views on asset safety.
The world seems to be turning away from globalization and towards protectionism. Yet despite this challenging environment for trade, the bankers who finance it remain surprisingly upbeat.
Euromoney Country Risk shows global risk rising, as leading economists and political experts revise their views on asset safety.
The question of banks moving to the mainland after Brexit will be settled at the dining table.
For many European bank stocks, 2016 was an unrelentingly awful year.
2016 will be remembered as the year the people punished politicians at the polls, unleashing a torrent of volatility in financial markets, with currencies taking a huge hit. Here are the biggest currency stories of 2016.
Perhaps size is an advantage for an innovation centre – small size, that is. It means you are nimble. So says Lithuania.
Capital markets activity in Europe is dominated by the UK, so the Brexit vote could have dealt a mortal blow to the European Commission’s plans to promote it through the capital markets union initiative. To survive, CMU will have to get global.
UK businesses face a post-Brexit hedging headache, as FX protection purchased before the referendum is now running out for many companies. The cost of renewing it has subsequently sky rocketed.
Brexit threatens eurozone, but region still crucial to global banks.
The topic of Brexit was never going to be far from the minds of delegates at the annual meetings of the International Monetary Fund and the Institute of International Finance, both being held this week in Washington, DC. And on Friday afternoon, delegates got a chance to hear the views of three vocal US bank chief executives — Jamie Dimon of JPMorgan, Mike Corbat of Citi and James Gorman of Morgan Stanley.
The European Project faces a much greater danger from the rise of populism than from the sovereign debt crisis.
UK commercial real estate’s post-Brexit shock has proved short-lived, and high-profile gating of investors in a number of UK real estate funds did not precipitate a flood of copy-cat behaviour. But the long-term outlook for investors and lenders in UK real estate remains extremely uncertain.
The UK’s challenger banks are stuck in a capital bind, forced to compete with each other on far worse terms than the big banks, but Brexit could offer a glimmer of hope.
While market talk suggests a number of finance professionals are delaying planned moves to London and some hiring seems to have been put on hold, specialist FX recruiters claim it has largely been business as usual post-Brexit.
Brexit-related currency volatility is fuelling a rise in foreign-exchange product mis-selling enquiries from businesses that have been burnt on ‘fiendishly complicated’ currency trades.
The uncertainty created by the UK’s recent referendum decision to leave the European Union is making the country’s banks reluctant to discuss openly their plans for ring-fencing parts of their domestic operations.
Brexit sparks investor flight; private equity sees an opening.
The UK's decision to leave the EU has left corporates scrambling to review many aspects of their business to ensure they are able to withstand heightened volatility. Injecting a greater level of optionality into their hedging strategies is one way to protect themselves from increased uncertainty, says Citi.
The swift formation of a new government and the opportunities created by the pound’s fall have quietened the doomsayers. But risk experts have downgraded their views on the economic outlook and government stability after the referendum, with so much that is still unknown.
New UK prime minister Theresa May is busy shaping her administration at 10 Downing Street, but it is events taking place barely miles away in Threadneedle Street that are exercising the minds of those trying to predict where the pound goes next.
Start-ups fear a funding stop and loss of access to the single market, but are already making back-up plans that could point the way for their peers in the more established parts of UK finance.
The UK’s decision to withdraw from the EU has opened a Pandora’s box for global investors at a time when commodity prices are depressed, sovereign bond yields are sinking to new lows and prospects are still dimming for many emerging markets (EMs).
The BoE still has plenty of monetary weapons in its policy arsenal, including expanding an asset-purchase programme akin to the ECB. But amid febrile market confidence, it needs to tread carefully.
As market activity to some extent returns to normal after the immediate post-Brexit plunge, dealers and traders are searching for signs of how clients will behave over the coming weeks and months.
UK-based financial institutions should expect the bulk of European Union regulations to remain in place up to and even after the UK's exit from the bloc, despite uncertainties over the terms of the eventual exit, lawyers say.
How and why trading was dominated by banks and ECNs, with retail investors cautious about getting steamrolled by volatility.
Paris and other leading European cities will have their work cut out usurping London’s status as the continent’s leading FX centre, even if they succeed in undercutting London’s status as the centre for euro clearing.
Britain's vote to exit the European Union fired volatility back into currency markets and gave traders opportunities in a number of currency pairs, including minors and exotic currencies as well as the majors.
Brexit will deal a mighty blow to the international and diverse City of London that has thrived for 30 years – but investment banks have bigger worries than the location of their EU offices.
The market tremors of the game-changing UK vote to leave the European Union will reverberate for years to come across global risk assets, the UK economy, banking stocks and currencies.
The European Central Bank (ECB) is likely to quickly challenge London’s status as the eurozone’s largest hub for the clearing of euro-denominated trades if the EU referendum goes against UK membership – but the move, which would be seen as highly political, would be beset with legal challenges.
The Swedish krona is ranked as the third weakest currency in a Brexit scenario after sterling and euro, according to analysts.
The UK’s economic and structural ECR scores are holding up well despite the possibility that its people will vote to leave the European Union (EU) next week. The strength of the sovereign’s outlook means that if the UK did vote to leave, it could quickly recover from the ensuing drop in its risk score, claim several experts this week.
The potential for next week’s EU referendum to trigger a sizeable movement in sterling highlights the need for clients to review their use of stop-loss orders as a risk-management mechanism, amid memories of the SNB debacle.
“Most likely they will register in the UK unless Brexit becomes a reality, in which case mainland Europe applications could begin to emerge, probably based in Frankfurt,” he says.
Existential threat to euro wholesale industry; Fears for loss of single-market passport.
With the spectre of a 'Leave' vote predominating in the UK EU referendum hanging heavily over FX markets, corporates are likely to further increase their use of forwards as a hedging option.
The sheer volume of risks faced by the FX market is placing pressure on banks to create mitigation strategies to cover a wider range of market challenges, from Brexit to illiquidity.
Country Risk Survey Q1 2016
Asia risk experts are, moreover, concerned by three issues: the possibility of Brexit causing ripple effects across the region; a stronger US dollar enticing capital outflow; and tensions in the South China Sea.
The US dollar has weakened against most major currencies this year, with the exclusion of the British pound, which is under pressure due to the threat of a potential Brexit.
Off message, April 2016
Brexit presents a fascinating situation for the financial services community.
The announcement of the referendum date of June 23 on UK membership of the European Union (EU) sent an already-weakening pound into a tailspin, which saw it testing multi-decade lows, but traders are divided on whether sterling has bottomed out as Brexit fears jump. Country risk: Global risk is as much political as economic
The movement of peoples displaced by the warfare has increased political risk in Europe, and Syria’s problems are likely to be exacerbated by growing tensions between Iran and Saudi Arabia. This, in turn, will affect European economies, feed into the UK Brexit debate, influence the outcome of elections and affect the EU project as a whole, all of which have the potential to buffet the financial markets.
Against the tide, December 2015
Britain’s renegotiation of its relationship with the EU could be a good thing for Europe too.
Against the tide, June 2015
The newly elected Tory party must wrestle with an invigorated SNP and its old bête noire, the EU. The proposed in/out referendum will cast a long shadow over the UK.
"The longer-term risk of a Conservative-led consortium is an in/out referendum on Europe by 2017, stoking increased fears of Brexit," says Ghose. "This could potentially have severe consequences for the UK banks, including reduced access to the single EU market if the current passporting rights cannot be renegotiated. This could potentially make corporate and investment banking untenable for global banks operating with a UK hub."
Against the tide, March 2015
Political pressures and lack of growth have put the European project under threat. Reform is urgently needed to set Europe back on course.
Steven Englander, global head of G10 FX strategy at Citi, says: “Investors don’t see any positive outcomes for GBP, with a Labour majority/coalition bad for business and Conservative majority/coalition raising prospects of Brexit.”
"I told him: if you think the French and the Germans are going to leave the position of London as a financial centre untouched you’re living in cloud-cuckoo land" - A top investment banker on his words of warning to a senior Bank of England official about the implications of a Brexit
Improved eurozone sentiment has seen sterling lose its safe-haven status and has renewed worries about the UK’s credit rating.
A referendum to decide whether the UK should remain in the European Union could negatively affect trade and investment into the UK, say economists, though some businesses threw their weight behind David Cameron's announcement.
RBS sponsored article, January 2013
After a couple of turbulent years worrying about Grexit – Greece being ejected from the euro – the City now has something closer to home to worry about: Brexit.
Although a Brexit remains in the balance, real politics suggest the government will favour a less confrontational position in Europe, though it still remains a high-stake option for Britain to take.