New York is well-positioned to replace London as the financial capital of Europe.
As reported by Bloomberg, this is the view of key figures in finance regarding what may happen after the UK – and London – leave the European Union as part of Brexit.
New York Seen as No. 1
Those who see New York, and thus Wall Street, as the new European financial capital include Britain’s Chancellor of the Exchequer, the deputy governor of the Bank of England, the chairman of Lloyd’s of London, the CEO of the London Stock Exchange (LSE) and the CEO of Morgan Stanley, as well as Open Europe, a think tank based in London.
"There is no way in the EU there is a center with the infrastructure or regulatory infrastructure to take the role that London has," particularly in capital markets, John Nelson, chairman of Lloyd's of London told Bloomberg. "There is only one city in the world that can, and that is New York."
Wall Street's advantage is most clear when it comes to euro derivatives trades, meaning many jobs may move from London to New York. Xavier Rolet, CEO of London Stock Exchange Plc, says that if Brexit strips London of the ability to clear euro derivatives trades, the entire business would move to New York, the only other city capable of clearing all 17 major currencies.
Case for Wall Street
Of all the world’s financial centers, the informed consensus is that only New York has the depth of expertise and capital flows to compete with London, as well as the necessary operational and regulatory infrastructure to assume London’s huge volume of financial transactions. Per research firm New Financial, as cited by Bloomberg, 78% of the capital markets activity in the European Union (EU) takes place in London.
Investment banks headquartered in the U.S. have located about 87% of European staff in the U.K., mainly London. A global survey ranks London and New York as the two most attractive locales for financial workers, with other European destinations far behind. Top talent redeployed from London is likely to prefer New York.
The deputy CEO for Europe at JPMorgan Chase notes that each time you need to create a new legal entity in a new locale, that traps capital and liquidity, increases inefficiency, and decreases profits. This is why concentrating European activity in London made sense. Dispersing it to other centers on the continent would be costly.
There are clear impediments to having Europe's financial headquarters in New York. The trading day is 9:30 AM to 4:00 PM, which is 2:30 PM to 9:00 PM in London and 3:30 PM to 10:00 PM on the continent. But Asian financial hubs such as Hong Kong and Singapore pose even greater time differences. Also, potential clients may be concerned that a financial institution in far-off New York lacks sufficient local knowledge to serve them well.