Why Wall Street fought so hard against Brexit
NEW YORK - Wall Street banks on Friday scrambled to contain the fallout from Britain's stunning vote to break ties with the European Union.
Some of America's largest banks, including Goldman Sachs and JPMorgan Chase, contributed hundreds of thousands of dollars to efforts to stop Britain from withdrawing from the European Union - popularly known as Brexit - worried it would disrupt their global operations and force them to rethink where and how they do business in Europe. Several have indicated that they would be forced to move thousands of employees out of London, which has acted as the headquarters of their European operations.
For years, big U.S. banks have used Britain as a financial springboard into the European Union. From London, they were able to sell their services across 28 nations without the headache of having to get regulatory approval from each individual country. The prospect of a more complex, and potentially costly, regulatory structure has some banking officials worried, analysts said.
"U.S. banks have used London as a primary center for activity, not only to operate in the U.K., but to provide services across Europe," said James Chessen, chief economist for the American Bankers Association.
Goldman Sachs contributed 500,000 pounds to the "Remain" campaign, according a person familiar with the company. So did JPMorgan Chase, the country's largest bank by assets, according to a person familiar with the matter. Citigroup and Morgan Stanley donated 250,000 pounds each, according to the Sunlight Foundation.
Citigroup created a "group of senior leaders from across our businesses and functions to ensure we were prepared for this possible outcome," Mike Corbat, the bank's chief executive, and Jim Cowles, its chief executive in Europe, Middle East and Africa, said in a letter to employees Friday morning. "While the result of the vote is not what we would have preferred, our diligent work over the past six months means we can be confident that Citi is well positioned to continue to serve our clients."
U.S. banks are likely to move some employees from London to other parts of Europe, and Frankfurt or Paris may emerge as the new financial center for the region, industry analysts said.
Earlier this month, JPMorgan Chase CEO Jamie Dimon warned about the effect a British vote to leave the EU would have on the bank, which has about 16,000 employees in Britain. "After a Brexit we cannot do it all here, and we will have to start planning for that. I don't know if it means a thousand jobs, 2,000 jobs. It could be as many as 4,000," he said from Bournemouth on the southern coast of England, according to the BBC.
On Friday, Dimon told employees in a letter that JPMorgan will maintain a large presence in London, Bournemouth and Scotland.
"In the months ahead, however, we may need to make changes to our European legal entity structure and the location of some roles," Dimon said. "While these changes are not certain, we have to be prepared to comply with new laws as we serve our clients around the world."
Bank of America, which considered contributing to the Remain campaign, but ultimately decided to stay neutral, according to several news reports, said it was still assessing the fallout from the vote.
"In the coming months, we will get a much clearer understanding of what the implications of this might be for our business, as well as the decisions that we will need to make before the change in membership becomes effective," Alex Wilmot-Sitwell, president of Bank of America's Europe, Middle East and Africa division, said in a letter to employees this morning.