Uncertainty over Brexit is 'poison' for banks, Philip Hammond told
Uncertainty over the future of financial services after Brexit is "poison" for institutions in the City of London, a leading banker has told Chancellor Philip Hammond.
Paul Achleitner of Deutsche Bank told Mr Hammond that banks were being forced to take decisions now on moving people and activities out of the City, without knowing whether the UK is heading for an orderly EU withdrawal or will crash out without a deal.
However, the Chancellor insisted the Treasury will continue to resist pressure to release its research papers on the possible outcomes of Brexit, warning this could prejudice negotiations with Brussels.
Mr Achleitner, who chairs Deutsche's supervisory board, said regulators were demanding that financial institutions spell out now their plans for every potential outcome, including what he termed a "Braccident", in which attempts to reach a deal fail.
With a lead time of up to 14 months needed to prepare for a possible no-deal Brexit in March 2019, "we don't have the flexibility to wait for what happens in the end", he told the Chancellor, who joined him on a panel discussion at the World Economic Forum summit in Davos.
"I'm an optimist. I believe there is going to be a meaningful long-term solution," said Mr Achleitner. "But as the management of a bank, I can't lay a one-sided bet on that happening. That puts enormous pressure on."
Banks were forced to consider whether capital, logistics and personnel need to be moved out of the UK while staff need to plan for issues like their children's future education, he said.
"These decisions need to be made with a lead time," said Mr Achleitner. "Therefore, the uncertainty we currently have - with all understanding for the negotiating position - is just poison."
Mr Achleitner said he had "no complaints" about the level of information being provided by the Treasury.
However, he added: "Even if as a management team, we say we (can) live with that uncertainty, the regulator says 'Excuse me? What are you doing? Where's your risk management?'"
Mr Hammond told the panel: "While it would suit some people to have all of our analyses laid out for everyone to see, to some extent we need to play our cards close to our chest.
"We will publish what we think we can publish without prejudicing our negotiating room for manoeuvre."
The Chancellor said Mr Achleitner's concerns underlined the need for a transition period after the official date of Brexit in March 2019.
He played down the prospect of City financial institutions moving elsewhere in the EU as a result of Brexit, warning they would be more likely to go to established global centres outside Europe.
"The idea that you can recreate in Frankfurt or Paris or Madrid or Amsterdam or Luxembourg or Dublin London's global financial sector, I honestly think is a fantasy," said the Chancellor.
"That isn't going to happen. The winner will be New York or Singapore if London is damaged by this process and the loser will be not only the UK but the EU."
He added: "EU businesses need access to the UK's financial services market to drive their competitiveness in the global economy. The scale and sophistication of the UK's financial services market is an asset for real economy businesses across the EU.
"There is a win-win solution here. We just need to unlock it in the course of negotiations which will take place during the course of this year."