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Brexit-Hit Banks to Start Moving Staff Abroad in Early 2018

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  • Brexit-Hit Banks to Start Moving Staff Abroad in Early 2018

U.K. politicians are fighting to get a deal early next year that will ease businesses’ panic about Brexit. For some industries, it’s probably too late.

Barring some major breakthrough, global banks will implement their relocation plans early next year to guarantee they’re able to have new offices inside the European Union running by the time the U.K. exits, people with knowledge of the matter said. There’s little Prime Minister Theresa May can do to stop lenders from executing their contingency plans, if they haven’t already, said one of the people.

“If there is no precise direction at the beginning of next year, I would say that the banking industry players would have to take decisions, early decisions in the worst-case scenario,” Societe Generale SA Deputy Chief Executive Officer Severin Cabannes said earlier this month, adding that the bank intends to create 300 new roles in Paris. We would need “about one year to make that transformation movement.”

With Brexit talks deadlocked for months, firms including Goldman Sachs Group Inc., Morgan Stanley, UBS Group AG and Royal Bank of Scotland Group Plc will start moving people, infrastructure and capital into their new trading hubs inside the bloc in the first quarter, said the people, who declined to be identified as the plans are not public. While banks would like to delay or ideally avoid implementing their contingency arrangements — likely to cost more than $500 million per firm — they need at least 12 months to establish full-scale operations inside the EU staffed by significant numbers of senior employees.

“It’s the very beginning of next year when we need to have a clear view on what’s going to happen,” Sylvie Matherat, chief regulatory officer at Deutsche Bank AG said earlier this month. If no Brexit deal is reached soon, banks will have to brace for the worst, she said.

The worst scenario is generally regarded to be Britain crashing out of the EU with no trade deal or transitional arrangement. EU chief Brexit negotiator, Michel Barnier said on Monday that U.K.-based banks will lose access to the single market as a “legal consequence” of the country’s divorce.

U.K. Brexit Secretary David Davis has said recently he was determined to maintain the competitiveness of Britain’s financial district and would negotiate a two-year transition deal. But banks fear it is too little, too late. That’s certainly the message they’re getting from EU regulators, with one calling the first quarter of 2018 “the point of no return” for banks to trigger their contingency plans and start moving people.

Amid the impasse, 20 banks are already in advanced discussions with EU regulators about securing trading permits. Bank of America Corp., Goldman Sachs and Morgan Stanley have signed leases on new office space, and more than half a dozen other firms are scouting new sites inside the EU.

Who Knows?

“You want to have it right from day one,” said Bank of America Chief Operating Officer Tom Montag has said, adding that they plan to move around 200 people. “Who knows what happens on this, but that’s what our plan is now, and we feel pretty comfortable with it.”

Firms will initially move a few hundred sales, trading and back-office staff each from London to cities including Frankfurt, Paris and Dublin, though the final number could swell to thousands depending on the outcome of the negotiations, the people said.

The U.K. could lose as many as 75,000 jobs in banking and insurance if it leaves the EU without a trade deal, said Sam Woods, Britain’s top banking regulator. About 10,000 U.K.-based jobs are probably at risk on “day one” of Brexit, Woods, CEO of the Bank of England’s Prudential Regulation Authority, told lawmakers earlier this month.

“We need clarity and I hope that negotiations will move forward and bring clarity” by the end of this year, BNP Paribas SA Chairman Jean Lemierre said Friday.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Brent Crude Oil Approaches $70 Per Barrel on Friday

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Nigerian Oil Approaches $70 Per Barrel Following OPEC+ Production Cuts Extension

Brent crude oil, against which Nigerian oil is priced, rose to $69 on Friday at 3:55 pm Nigerian time.

Oil price jumped after OPEC and allies, known as OPEC plus, agreed to role-over crude oil production cuts to further reduce global oil supplies and artificially sustain oil price in a move experts said could stoke inflationary pressure.

Brent crude oil rose from $63.86 per barrel on Wednesday to $69 per barrel on Friday as energy investors became more optimistic about the oil outlook.

While certain experts are worried that U.S crude oil production will eventually hurt OPEC strategy once the economy fully opens, few experts are saying production in the world’s largest economy won’t hit pre-pandemic highs.

According to Vicki Hollub, the CEO of Occidental, U.S oil production may not return to pre-pandemic levels given a shift in corporates’ value.

“I do believe that most companies have committed to value growth, rather than production growth,” she said during a CNBC Evolve conversation with Brian Sullivan. “And so I do believe that that’s going to be part of the reason that oil production in the United States does not get back to 13 million barrels a day.”

Hollub believes corporate organisations will focus on optimizing present operations and facilities, rather than seeking growth at all costs. She, however, noted that oil prices rebounded faster than expected, largely due to China, India and United States’ growing consumption.

The recovery looks more V-shaped than we had originally thought it would be,” she said. Occidental previous projection had oil production recovering to pre-pandemic levels by the middle of 2022. The CEO Now believes demand will return by the end of this year or the first few months of 2022.

I do believe we’re headed for a much healthier supply and demand environment” she said.

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Crude Oil

Oil Jumps to $67.70 as OPEC+ Extends Production Cuts

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Oil Jumps to $67.70 as OPEC+ Extends Production Cuts

Brent crude oil, against which Nigerian oil is priced, rose to $67.70 per barrel on Thursday following the decision of OPEC and allies, known as OPEC+, to extend production cuts.

OPEC and allies are presently debating whether to restore as much as 1.5 million barrels per day of crude oil in April, according to people with the knowledge of the meeting.

Experts have said OPEC+ continuous production cuts could increase global inflationary pressure with the rising price of could oil. However, Saudi Energy Minister Prince Abdulaziz bin Salman said “I don’t think it will overheat.”

Last year “we suffered alone, we as OPEC+” and now “it’s about being vigilant and being careful,” he said.

Saudi minister added that the additional 1 million barrel-a-day voluntary production cut the kingdom introduced in February was now open-ended. Meaning, OPEC+ will be withholding 7 million barrels a day or 7 percent of global demand from the market– even as fuel consumption recovers in many nations.

Experts have started predicting $75 a barrel by April.

“We expect oil prices to rise toward $70 to $75 a barrel during April,” said Ann-Louise Hittle, vice president of macro oils at consultant Wood Mackenzie Ltd. “The risk is these higher prices will dampen the tentative global recovery. But the Saudi energy minister is adamant OPEC+ must watch for concrete signs of a demand rise before he moves on production.”

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Gold

Gold Hits Eight-Month Low as Global Optimism Grows Amid Rising Demand for Bitcoin

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Gold Struggles Ahead of Economic Recovery as Bitcoin, New Gold, Surges

Global haven asset, gold, declined to the lowest in more than eight months on Tuesday as signs of global economic recovery became glaring with rising bond yields.

The price of the precious metal declined to $1,718 per ounce during London trading on Thursday, down from $2,072 it traded in August as more investors continue to cut down on their holdings of the metal.

The previous metal usually performs poorly with rising yields on other assets like bonds, especially given the fact that gold does not provide streams of interest payments. Investors have been jumping on US bonds ahead of President Joe Biden’s $1.9 trillion coronavirus stimulus package, expected to stoke stronger US price growth.

We see the rising bond yields as a sign of economic optimism, which has also prompted gold investors to sell some of their positions,” said Carsten Menke of Julius Baer.

Another analyst from Commerzbank, Carsten Fritsch, said that “gold’s reputation appears to have been tarnished considerably by the heavy losses of recent weeks, as evidenced by the ongoing outflows from gold ETFs”.

Experts at Investors King believed the growing demand for Bitcoin, now called the new gold, and other cryptocurrencies in recent months by institutional investors is hurting gold attractiveness.

In a recent report, analysts at Citigroup have started projecting mainstream acceptance for the unregulated dominant cryptocurrency, Bitcoin.

The price of Bitcoin has rallied by 60 percent to $52,000 this year alone. While Ethereum has risen by over 660 percent in 2021.

 

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