How will financial institutions deserting London affect the Cayman Islands?
The latest financial institution making plans to relocate jobs away from the UK is Morgan Stanley, which has announced that Frankfurt will become its post-Brexit EU hub, a move that could shift an initial 200 jobs to Germany.
Morgan Stanley joins Standard Chartered and Nomura, both of which also picked Frankfurt as a new EU base, and JP Morgan and Goldman Sachs, which are moving jobs out of London to various other centres. Morgan Stanley’s asset management arm is to relocate to Dublin, as several European cities woo jittery banks that will not hang around to see what final deal is hammered out between the UK and Europe before they start looking elsewhere. A competition to host the UK’s bankers post-Brexit would have as its slogan: “Better in than out.”
The key for banks is regulation. The moment it was announced that the UK would leave the single market, the die was cast. Even if Brexit goes smoothly from a regulatory standpoint, which is wishful thinking, certain financial institutions that cater to Europe would need to move onshore, since conducting business would be more expensive otherwise. In some cases, it is mandatory from a compliance perspective that transactions are onshore. The beginning of a flight to Europe is not necessarily a hedge against uncertainty. In many instances, there is no choice.