‘Huge risk’ in relocating derivatives warns Mark Carney
London-based banks considering relocating to other European nations because of Brexit face “huge” financial and operational risks, according to Mark Carney, governor of the Bank England.
'Up to 4 years' to move
Mr Carney described derivatives as a “highly complex, highly interrelated” market that needed to be “intensively, continuously supervised”. He said it could take up to four years for an institution dealing in derivatives to move.“If it is done conveniently with work-arounds, then one is taking a black box risk in the jurisdiction that accepts the work-around,” he added, pointing out that it was home to 40 per cent of the global derivative business.“One thing I know is that the capacity is here, the collateral is here, the people are here, the capital is here, the expertise is here, the supervisory ability is here, the clearing is here,” he said. “So the one jurisdiction that is going to have capacity is the UK.”Meanwhile, Ben Broadbent, Mr Carney's deputy, told the BBC on Friday that he believed Donald Trump's election victory had benefited the British economy “at the margin” by boosting financial markets.Financial markets 'more optimistic'
While he sounded a note of caution about the long-term effects of some of Mr Trump's stated policies, Mr Broadbent told BBC Breakfast, “You've seen business confidence rise particularly in the United States. You've seen financial markets get more optimistic and I think that has had some impact on us.“So far, at the margin, yes, it's been positive for global sentiment, and for that reason, and to that extent, for us as well.”Related news:
- London banks gear up post-Brexit plans to move abroad
- Brexit News-May rules out single market and free movement
- Government promises Brexit bill within days after court defeat
But Mr Broadbent said there remained concerns over the new president's protectionist leanings. “There are other things the US administration has said that people may worry more about, or have done in some markets,” he said.“And I should say overall that there's a lot we have yet to see about the detailed plans, including those for fiscal policy, for government spending and taxes and so forth, so we'll have to wait and see.”* The Markit/CIPS purchasing managers' index (PMI) for the UK's all-important services sector showed growth had dropped in January for the first time in four months. The PMI of 54.5 last month was down from December's 15-month high of 56.2. Any figure on the index above 50 indicates growth.Chris Williamson, chief business economist at IHS Markit, said January's fall might be only temporary. “Encouragingly, optimism about the coming year has risen to its highest in one-and-a-half years, improving across the board in all sectors to suggest that January's slowdown may only be temporary,” he said.
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