Brexit may be threatening London’s financial passporting rights as well as its euro clearing business, but the brutal impact it has had on the pound has made it cheap for Asian banks to expand their services in Britain.
Singaporean bank DBS, Asia’s fifth largest private bank with $81.2 billion (£65.5 billion) of assets under management as of the end of 2016, told The Financial Times that it plans to quadruple its London wealth management operation now that it has retained its UK securities licence.
There are no numbers available for the headcount in London, but DBS has 21,000 staff globally.
“It’s cheaper to get talent and set up base, and I believe in the long term prospects of London. You can’t unwind the fact that it’s a great city,” Tan Su Shan, head of wealth management at DBS told the FT.
“Sterling getting cheaper has been an attractive draw to the Asian investor, and with Brexit, the UK may reach out to Asia more as a trading partner.”
Ever since Britain to leave the EU on June 23, 2016, the pound has cratered against the US dollar:
This is good for Asian investors because it makes setting up shop, expanding, hiring or buying goods very cheap for them. The boon for Asian investors will be seen as a positive note for the City amid the flurry of major problems London is preparing for once it leaves the EU on March 29, 2019.
Britain’s government is taking the nation towards a “hard Brexit” — leaving the EU’s Single Market in return for full control of immigration. But a “hard Brexit” does not just mean leaving behind unified import and export rates within the bloc, it is set to have a huge impact on financial services.
The loss of passporting rights following Brexit is one of the biggest fears in the City of London and seems almost a certainty under May’s “hard Brexit” plan. Passporting rights allow UK-regulated firms to sell goods and services across the EU without being re-regulated in each local market.
If the passport is taken away, London could cease to be the most important financial centre in Europe, costing the UK thousands of jobs and billions in revenues. Around 5,500 firms registered in the UK rely on the European Union’s passporting rights for the financial services sector, and they turn over about £9 billion in revenue.
Meanwhile, EU officials are warning that the UK could also lose euro clearing — a €930 billion (£792 billion, $995 billion) daily business — after Brexit.