Japan banks in Brexit ultimatum

Japanese financial institutions have told the government they will begin moving some functions from London within six months unless they receive clarity on the UK’s future relationship with the EU, highlighting the dilemma international banks face over Brexit.

Executives from Japanese groups including investment banks Nomura and Daiwa Capital Markets laid out their position at a “frank” meeting on December 1 with Simon Kirby, the UK City minister, and Mark Garnier, international trade minister with responsibility for financial services, according to two people with knowledge of the meeting.

“I think you are going to get a steady drumbeat of these kind of announcements over the next few months, as everyone in the City starts talking to regulators, applying for licences, setting up subsidiaries and even taking options on buildings in the EU,” said Sir Gerry Grimstone, chairman of Standard Life and deputy chairman of Barclays.

A senior executive at a large US bank said the Japanese were “not unique in wanting clarity” and that most companies were planning for the “worst case outcome absent a clear view of the end-game”. Banks fear the UK losing access to Europe’s single market, so they and other financial services groups could no longer “passport” from London to the European Economic Area’s 31 countries.

Lloyd’s of London, the insurance market, has already set a timetable for plans to move part of its operations to the EU, aiming to put a proposal to its members by February next year.

The Japanese banks said they needed imminent clarity on “passporting” or they would be forced to begin moving some functions out of London by mid-2017. “It’s fairly binary for them: they either have access to their markets or they don’t have access,” said Philip Hammond, chancellor,on Thursday. In South Korea yesterday, Mr Hammond said the UK’s preference was to retain “tariff-free access on a reciprocal basis” to the European market after Brexit.

“The Treasury will want to give you the passport for the next 300 years but may not have the chance because of the decision of the Europeans,” said a senior executive at a large US bank.

‘I think you are going to get a steady drumbeat of these kind of [demands]’

Sir Gerry Grimstone