BoE Official: European Central Bank Scrutiny Could Push Banks to Leave London

Banks might be leaving London more if the European Central Bank (ECB) adds more scrutiny, Bloomberg reported Monday (March 7), citing Jon Cunliffe, the Bank of England deputy governor.

“To the extent that business does move, it will change the economics for the firms providing it, and that will lead over time to investment decisions, location decisions, not necessarily to move things from the U.K. to the EU, but there are other jurisdictions,” Cunliffe told a committee in the House of Lords on Monday.

Cunliffe said the ECB might make it so some businesses have to move back to the European Union in the wake of its review of banks’ booking models and trading desks. According to him, firms might respond by moving to the U.S. instead, or somewhere else.

The ECB and national regulators have been working on looking into where banks have key staff and book trades, with an eye towards making it so EU client-related risks are accounted for in the bloc rather than slipping from their oversight in other places.

This is all part of a bigger move to make it so global firms cannot set up a token presence in the EU but mostly work in London.

In addition, it’s coming as London banks are facing pressure from European Commission efforts to move clearing, one of the biggest parts of global finance, into the EU by 2025. Bloomberg noted that clearinghouses operate “at the center of markets” and collect collateral from both sides of a trade, making sure a default on one doesn’t cause panic.

PYMNTS reported late last year that the U.K. was looking into adding new responsibilities for its regulators.

Read more: UK Expands Financial Regulators’ Duties

The report said the regulators will be working on boosting growth and competition in finance, in addition to the other tasks they had in the past like maintaining financial stability and consumer protection.

The changes were purported to give more freedom to regulatory agencies, allowing them to rewrite rules on initial public offerings (IPOs), green finance, crypto or other such things.