BCN-48 German banks warn of “Brexit” chaos in European capital markets




German banks warn of “Brexit” chaos in European capital markets

BERLIN, Sept. 12, 2018 (BSS/Xinhua) – German banks warned on Tuesday that
a disorderly British exit from the European Union (EU) could cause chaos on
European financial markets.

There would be “upheaval on European capital markets, not just in London
but also in Frankfurt, Paris and Amsterdam” if Britain crashes out of the
bloc without a deal in March 2019, Andreas Krautscheid, president of the
German Banking Association (BdB) told the newspaper group Redaktionsnetzwerk
Deutschland (RND).

“Brexit is occupying most of our member banks and all of them are becoming
increasingly worried,” Krautscheid added.

The need to treat a former EU member United Kingdom differently with
regards to data management in particular posed a threat to the current
interconnectivity of British and European banking systems.

The BdB president noted that a large number of complex financial
transactions were completed between the United Kingdom and mainland Europe
every day with millions of related datasets transferred from London to the

“Without a Brexit agreement or transition agreement all of these channels
would have to be closed from one day to another in late March because the
EU’s General Data Protection Regulation (GDPR) does not allow for data
exchanges with third countries,” Krautscheid explained.

The BdB warning comes shortly after German finance minister Olaf Scholz
told banking industry representatives in Frankfurt that a disorderly Brexit
could spark a new financial crisis in Europe.

Scholz cautioned that it was still “difficult to say whether (a post-
Brexit agreement) can be reached” before March 29th 2019 when the United
Kingdom formally ceases to be an EU member.

As a consequence, the German minister recommended to German business
leaders to make the necessary preparations for a chaotic split between London
and Brussels before it was too late.

However, German Chancellor Angela Merkel has recently drawn attention to
potential competitive advantages which domestic bankers could secure thanks
to the United Kingdom’s departure.

Merkel announced that her government would change national labor laws in
order to enable financial institutes to attract highly-salaried staff from
London and support a French bid to strip Britain of the right to conduct
lucrative Euro-clearing activities on its soil after Brexit.

“Politically, I can easily explain that Euro-clearing must take place
within the Eurozone and in that case, Frankfurt is certainly an excellent
location,” Merkel said.

Frankfurt and Paris are the two main competitors for financial services
business relocating from the United Kingdom to the EU as a consequence of

The British financial services lobby group “TheCityUK” estimates that
70,000 UK jobs could be lost in the domestic industry if Britain does not
remain in the single market.