Executives from top U.S. banks on Wednesday said the United Kingdom's potential hard exit from the European Union does not pose a systemic risk to the global financial system, but acknowledged that the industry cannot plan for all possible outcomes.
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The deadline for a “No Deal Brexit” is Friday, but Prime Minister Theresa May is pushing the other 27 members of the E.U. to agree to an extension. The bloc began meetings on Wednesday in Brussels to discuss such a measure, as May’s government continues to work with leaders of the Labour Party to try to come up with a compromise exit agreement.
It appears likely the U.K. will be given until June 1, 2020 to craft a deal, according to media reports. Should the country remove itself from the E.U. without a formal deal, it would likely roil the international financial markets and spur significant uncertainty for several industries, including automotive manufacturers.
Many companies, however, have already begun preparing for such an outcome, including U.S.-based banks.
“Since Article 50 was filed, we have prepared with a mindset and an eye toward a hard exit. So yes, we have plans in place,” Citigroup CEO Michael Corbat told the House Financial Services Committee.
Corbat added that the institution has relocated its banks out of the U.K. to Ireland, and moved the bulk of its broker-dealers to Germany.
JPMorgan Chase CEO Jamie Dimon said he did not “know all the potential outcomes” of a hard Brexit, but noted that it “certainly does not rise to systemic” risk. Those comments were echoed by Charles Scharf, CEO of Bank of New York Mellon.
“We and our clients are prepared for it, but don’t believe we understand all of the potential ramifications,” he told the panel, adding that the company moved the bulk of its operations to Belgium and has “built up control functions."
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Several executives, however, stressed the need for the institutions to remain in England given its prominence as a global economic power.
“We collectively finance the largest institutions in the world, a predominate number of which are in the U.S., so we absolutely need to serve them globally,” Morgan Stanley CEO James Gorman said at the hearing.