View this article online: https://www.insurancejournal.com/news/international/2016/04/20/405911.htm
The City of London should expect its preeminent role in the global financial system to fade if Britain leaves the European Union, according to Mark Carney.
The governor of the Bank of England — the de facto custodian of the capital’s financial center — told lawmakers on Tuesday that membership of the bloc buttresses London’s dominance of the international banking landscape. Leaving the EU would probably diminish that, he said.
“It’s less likely that London would retain its position as it currently is,” Carney said in testimony to the House of Lords Economic Affairs Committee. “It’s unlikely to be enhanced.”
Carney had begun his comments defending the central bank’s interventions in the EU debate because it would be “political to suppress important judgments” by him and his officials on the risks posed by leaving. The precise consequences for London would depend on negotiations if the country votes for a so-called Brexit in the June 23 referendum, he said.
“Its position as the leading international financial center is undoubtedly reinforced by its membership of EU and ease of access to the euro area,” said Carney, a former Goldman Sachs Group Inc. executive. “It will continue, but in a different form and potentially to a different order of magnitude. In other words, smaller.”
The financial district, known as the City, sits on London’s earliest foundations, dating from about the Roman invasion in the first century. The BOE, one of the world’s oldest central banks, was founded more than 320 years ago.
The governor’s comments echo others from the so-called Square Mile. Executives at institutions including HSBC Holdings Plc, Barclays Plc and Goldman Sachs Group Inc. are among those to have warned Brexit would damage the City’s status as a financial hub.
UBS Group AG warned this week that finance would be the industry to lose the most. Firms most tied to the domestic economy would suffer because leaving the EU could hamper growth, while any change in the U.K.’s credit rating would push up funding expenses. Larger banks would be hit by an increase in costs arising from the greater risk attached to their British assets, and potentially more onerous rules to access the EU, according to the Swiss bank.
Carney’s remarks came a day after Chancellor George Osborne made the same case. In an economic analysis, the Treasury said financial services contribute more than 7 percent of the economy and employ more than 1 million people nationwide.
The industry is “crucial to the success of the U.K. economy” and financial integration within the bloc has helped firms grow in size, the study said.
“If the U.K. left the EU, it’s financial services industry would suffer from reduced access to the single market,” the Treasury said.
Advocates of Brexit say the financial industry is too established in the U.K. to be threatened and note Switzerland as an example of a European nation where finance can thrive outside the EU.
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