The Treasury Select Committee this morning took evidence from three
bankers on the UK's economic relationship with the European
Union.
The witnesses were:
- James Bardrick, Head of Citi UK and CEO of Citigroup Global
Markets Ltd
- Mark Garvin, Vice Chairman, JPMorgan Corporate and Investment
Bank 


- Kevin Wall, CEO, Barclays Ireland
Overview:
All three witnesses appeared content that their institutions were
well-prepared for operations outside the EU, including in the
event of a no-deal scenario.
Questions of interest:
Committee chair opened the session by asking
about preparations for Brexit and whether anything was being held
back to see what happened. James Bardrick said Citi was pressing
ahead with plans, including moving some staff from London to
Europe. Mark Garvin said in many cases JPMorgan’s planning was
“passed the point of no return.”
asked if life would be easier
for EU27 banks passporting into the UK than for UK banks moving
to EU countries. Kevin Wall said there was an asymmetry and he
would welcome temporary permissions clarity across the EU.
asked about back-to-back
booking models, to which Mark Garvin replied that preserving
centralisation of risk management was very important to the whole
notion of being a global bank. It might be necessary to have some
short-term arrangements to mitigate risk. James Bardick added
that centralised risk management created efficiencies. There
needed to be a balance between things controlled on the ground
and efficiencies. But that would change over time.
Replying to ’s question about job losses
in London, James Bardick said Citi’s starting point was different
to others because 60% of European staff were already outside the
UK. Mark Garvin said JPMorgan had a centralised model, employing
16,000 in the UK. Brexit would be a process over several years.
Kevin Wall said Barclays Ireland, like the others, was planning
to move only a few hundred roles with minimum disruption.
Regarding equivalence, Mr Garvin said there would need to be a
bespoke arrangement going forward. There would have to be
autonomy of decision-making, but withdrawal or amendments would
have to be time-managed. Mr Wall agreed that anything that
minimised disruption would be welcome. Mr Bardrick said any
framework would have to be sustainable and predictable, which
would not be the case if equivalence could be withdrawn at short
notice or for no apparent reason. James Bardrick said Citi was
disappointed that in the government’s White Paper mutual
recognition as an approach was not pursued.
asked about the ECB’s
statement that real risk would have to be transferred. Mr Garvin
said that had been taken into account in JPMorgan’s plans.
On derivatives, James Bardrick said changes in arrangements threw
up questions about whether contracts could remain valid. Citi was
aligned with the Bank of England in that dealing with contract
continuity, data and other fundamental issues needed public
sector intervention and could not be handled firm-by-firm.
Replying to Mr Elphicke on data, Mr Wall said exchange of data
was critical. Anything that impeded that would be damaging. He
was hoping for a legislative or regulatory solution.
asked for more detail about
data centres and cross-border contracts. All three witnesses said
there were no plans to set up new data centres.
Ms Ali pressed for an explanation of how the banking sector would
be affected by a no-deal Brexit. James Bardrick said Citi was
unusual because it already had the right people in the right
places. Technology changes would probably have a greater impact,
but it was not possible to predict. Mr Garvin agreed that the
banking industry was constantly in a state of flux and it had
been through "far more significant tumult than this." The vast
majority of staff would not be affected by Brexit.
asked about the effects on
customers of a no-deal Brexit. All three witnesses said all
clients would continue to be served and additional charges to
customers were not planned.
focussed on jobs,
specifically during the transition period. Mr Wall said a
transition period would reduce the execution risk, although there
were no assumptions being made and plans were in place for the
bank to be ready by March 2019. Mark Garvin said time was one of
the greatest contributors to risk in this exercise. A transition
period would significantly reduce that risk. James Bardrick
agreed that all plans were for a worst-case scenario.
asked about the
principles surrounding whether there should be alignment or
divergence with regard to regulation. Mark Garvin said JPMorgan
was globally regulated and would like to see the principles as
closely aligned with global principles as possible. A
fragmentation of regulations would add to costs and the risks of
regulatory arbitrage. James Bardrick agreed that global alignment
was important. The fact that the future was unpredictable should
not stand in the way of providing the best services to customers.
Any arrangement must not be a day-one rigid agreement.
Mark Garvin concluded: “…we are comfortable with the current
arrangements,” but it was important to be aware of and responsive
to future changes.
ended the session by asking
for views on those who called for having a competitiveness
objective. James Bardrick said competitiveness was a long-term
topic that needed careful attention by policymakers. Mark Garvin
agreed it was a broader topic about the design of the financial
system.
