Financial institutions based in Britain will lose so-called passporting rights allowing them to operate across the European Union unless post-Brexit Britain is at least part of the European Economic Area, ECB policymaker Jens Weidmann has said.
“Passporting rights are tied to the single market and would automatically cease to apply if Great Britain is no longer at least part of the European Economic Area,” Weidmann was quoted as saying in an interview with Britain’s Guardian newspaper.
Passporting rights are considered to be one of several important factors underlying the strength of the City of London financial district and there have been many warnings that losing them would represent a severe blow for the industry.
Weidemann is the president of the Deutsche Bundesbank and, as such, a member of the European Central Bank’s Governing Council. During the referendum campaign, he came out publicly in support of Britain’s continued membership of the EU, saying the bloc had given the country an economic lift and posed little threat to London.
The German central bank chief also said he expected some London-based businesses to reconsider the location of their headquarters after Brexit.
“Of course several businesses will reconsider the location of their headquarters,” he said in the interview, held with the Guardian and other newspapers including Germany’s Sueddeutsche Zeitung.
“As a significant financial centre and the seat of important regulatory and supervisory bodies, Frankfurt is attractive and will welcome newcomers,” he said referring to the charm offensive of the German financial capital.
Home to the European Central Bank, the EU’s insurance regulator EIOPA and 198 banks, Frankfurt is a natural contender in the battle to lure the City of London’s financial behemoths.
“But I don’t expect a mass exodus from London to Frankfurt,” Weidmann added.
Indeed, the city on the Main has never truly challenged London for pre-eminence in Europe, although that could change after Brexit.
Elsewhere in the interview, Weidmann also expressed scepticism about calls from ECB President Mario Draghi to complete monetary union with a political union, saying there is no willingness among governments in Germany, France or Italy to cede control over their national budgets.
He further said the European Central Bank suffers from a conflict of interests due to its dual responsibilities for setting monetary policy in the euro zone and for supervising banks.