January 25, 2017

London Bankers May Dodge One-Way Trip to Frankfurt

by Breakingviews.

London bankers may have a way out of a no-return ticket to the continent: befriending their counterparts on the other side of the English Channel. UK-based capital markets practitioners could in theory still advise corporate clients on the continent in the wake of the UK leaving the European Union, according to people familiar with the situation – as long as they were accompanied by a colleague in, say, Paris, Frankfurt or Madrid. These “chaperones” – as one debt markets banker terms them – would need to sit in on meetings, but could otherwise act simply as silent observers.

UK and U.S. banks have a financial incentive to explore Brexit solutions that don’t entail a staff exodus. The use of EU chaperones wouldn’t obviate the need for – and hence the cost attached to – a separately capitalised subsidiary based on the continent. After all, those bankers would have to operate out of a EU-sanctioned institution. And using chaperones would probably only work for capital-raising business, not for trading.

The workaround also faces several challenges. The laws of both individual countries and the wider EU would have to remain accommodating. In the event of a bitter Brexit divorce, continental politicians would probably try to put a stop to the ruse. And EU-based bankers would almost certainly bristle at the prospect of London rainmakers using them as marionettes.

Still, keeping more bankers in London might lessen the expense and the administrative headache of shifting staff to European capitals that lack London’s abundance of schools and accommodation. And judging by the haunted looks on the faces of most London bankers at the thought of upping sticks, anything is worth a try.

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