UBS chairman backs London to remain EU’s top financial centre

UBS chairman Axel Weber said Brexit would not threaten London’s position as Europe’s dominant financial centre so long as the continent remained fragmented in terms of regulation and embroiled in internecine competition.

Speaking at the Financial Times Global Banking Summit on Wednesday, Mr Weber said no other city had emerged as a viable challenger to the City as a base for international finance, and that squabbles between countries had been mutually detrimental.

“The division of Europe is a massive benefit to the City of London because if Europe were united the impact . . . of Brexit would be much more,” the former Bundesbank president said. “It’s all about competition between financial centres within Europe, Frankfurt against Paris. It shouldn’t be a zero-sum game.”

He added that “unfortunately, it’s a European habit to play the national card as opposed to the European card. It has made Europe weak in the past. It will continue to do so in the future.”

Brexit talks have reached their endgame, with negotiators attempting to put in place a deal by the end of the week. However, financial services have been excluded, leaving bankers and fund managers hoping for a last-minute agreement on regulatory equivalence that would at least maintain some form of UK access to EU markets and avoid market disruption.

Mr Weber used his own bank to illustrate the lack of impact on London so far. UBS has more than 5,000 staff in London and has moved only 200-250 to the EU.

The chairman predicted in January 2017 that as many as 1,000 employees would be forced to relocate but revised this figure down after the bank realised it would be able to keep many of its back and middle office staff in the City. 

“When we get asked why don’t you move more jobs to Europe, show me a European landscape that offers the same opportunities,” he said. “London still offers a lot more talent and jobs . . . the Europe that exists with 27 lines drawn across the paper will not attract many.”

In December 2015, UBS had 5,373 staff based in the UK, or 8.9 per cent of its global staff. Four years later the number had risen to 5,704, although that represented a slightly lower proportion of the total at 8.3 per cent. Over the same period, the number of EU staff increased to 7,048 from 4,957.

Over the past decade there have been many moves to integrate European finance — including proposals for a universal deposit insurance scheme and capital markets union. But few have come to fruition aside from the Single Supervisory Mechanism, which oversees the biggest 117 lenders in the region, and the Single Resolution Board, which manages bank failures.

“Europe is a fragmented market of 27 regulators, 27 financial markets, with a 28th regulator on top. You would not invent a system like that if you were to design a functioning system,” he added. “Brexit, in addition to Covid, should really force the EU to go back to the drawing board and start from a fresh piece of paper.”

Mr Weber, a former member of the ECB’s governing council, also addressed the current ban on dividends and share buybacks. Alongside huge pandemic-related loan provisions, the rule has been a big factor in many lenders steep share price declines since March. 

While Switzerland has already partially lifted restrictions, supervisors in the EU and UK are still debating the matter, with a decision expected later this month.

Shareholders “would not invest in banks at all if the stronger ones are not allowed to pay . . . dividends. They would make banks uninvestable,” Mr Weber said. “Those that can’t afford it are probably less interesting for shareholders to invest in anyway. That’s life. And I think that’s how life should be.”

Credit Suisse chief financial officer David Mathers also spoke at the summit and similarly supported a “case by case” approach to banks paying dividends, rather than a “one size fits all approach” and blanket ban.

Mr Mathers, who has been an executive at the Swiss lender for a decade, added that he was “not assuming that equivalence will be granted” to the UK — ensuring at least partial access to the EU single market in financial services — and that the bank had been planning on a “hard Brexit” from the start, just in case.

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