Brexit Means Business as Usual

At last, Brexit is nearing its conclusion.

And before you close your browser on first sight of the word, rest assured, we’re not here to talk about the deal. You can find a mountain of hyperbole and conjecture on that subject elsewhere.

Given the customers we serve in our line of work at Origin, we actually get an interesting angle on Brexit, one that gives a particular insight into what might happen in the coming months as the UK exits the EU. What shape or form that exit takes remains open to interpretation. As does whether it will be a good or bad outcome. But our customers’ actions have been enlightening.

Conversations we’ve had in recent months with European partners, especially in Germany last week, made clear that fewer than expected are moving away from London. Those being asked to move are almost all in “relationship” roles (sales, RM etc) rather than in “execution” (trading, syndicate, etc). The post-Brexit exodus of core banking operations hasn’t materialised.

Paris and Frankfurt have benefited but the likes of Luxembourg, Amsterdam and Dublin haven’t made the gains many expected. One reason for this is because when a bank sets up a continental entity (such as “Origin Bank, Paris SA”), counterparties assess country risk based on where the entity sits, not on the location of its headquarters. So in our example, Origin’s counterparties look at our country risk as “France”, not the UK. Typically, people have larger country risk limits for France and Germany (given economy size) versus, say, Luxembourg, Netherlands or Ireland, especially given the latter’s troubles during the recent EU sovereign crisis.

Anecdotally, I’ve heard that office space in Frankfurt is completely rented out. However, the jobs that local banks are hiring for aren’t all in front office, but rather in risk, compliance, IT and support functions. It seems like the message from the regulator is that local subsidiaries cannot just be shells. Rather, each entity must have the full and appropriate infrastructure needed to operate.

This is the “operational” equivalent of having to ensure that each entity is also locally funded. From that perspective, I’ve also heard of cases where the senior MD (the individual who is typically legally liable, sometimes known as “code staff”) is being asked to move, while productive front office staff, (associates, VPs, etc) are staying put in London.

As for Origin, we’re in London to stay and, excitingly, we’ve recently opened up in Hong Kong. For now, we have no plans to change that footprint. Our largest group of customers on the syndicate side are in London, and we’re also fully aware of the deep talent pool (tech and business) here, not to mention investment capital. Also, even before Brexit, we were comfortable having customers worldwide. We’re proud to be growing a global business, and more than happy to serve customers with plenty of travel. So, from our perspective, Brexit changes little. It’s business as usual.

More broadly, we strongly believe Origin can be a powerful solution for clients who will need to move staff in order to satisfy regulatory requirements. Those who were in the market before the introduction of the Euro in ‘99 tell us how syndicate and trading desks were split across Europe, with each desk trading bonds denominated in Sterling, Francs, Marks, and more. Whilst we don’t believe we’ll see such an extreme scenario, split teams will be more common after Brexit, and those teams will need smart ways of collaborating and avoiding unnecessary manual and redundant work.

One of our chief value propositions is the way in which we allow collaboration between teams. We’ve already seen it between teams in Europe and Asia, and we’d expect to see this function being used within Europe, too. Consequently, whatever happens with Theresa May’s deal, Brexit for Origin will be a great opportunity.