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As the UK readies to set Brexit in motion, Milan enters race to become host of Euroclearing

by Leonardo Maisano

Thousands of employees of HSBC could be the first to pack their bags. The location is already known: Paris. They only need to prepare the offices, expand them, and the bank with heart in London and roots in China will have an important offshoot in France. Within two years it could be fully operational. UBS expects to deploy similar troops, according to President Axel Weber, but the destination is not yet clear.

JPMorgan aims for Frankfurt where – according to anonymous sources – it will transfer its entire EU headquarters currently in London. More than the 4,000 estimated by Jamie Dimon recently? It would seem so, according to the CEO of the US bank which employs 16,000 people in the UK. “The number of transfers seems to be more numerous than expected,” he said.

The German lessons are not only sought after among the skyscrapers of Canary Wharf but also in the Old City. Germany, on the same bank of the River Main, is also the possible destination of Goldman Sachs, which continues to deny precise numbers: 3,000 should sacrifice themselves in the name of Brexit, although - we repeat – there's no official confirmation yet.

Frankfurt is the likely choice of UK lender Lloyds, and could also be the final destination of the European Bank Authority (EBA), the regulator of the banking system that many cities contend, including Milan.

The city has been active for some time. On March 27, the Global Financial Centres Index will be presented in the Lombardy capital and, two days later, ministers Pier Carlo Padoan, Angelino Alfano and Milan Mayor Giuseppe Sala will be in London for a roadshow dedicated to Milan that will go beyond the financial sector and will concern EMA, the European medicines agency that will be forced to quit London and which Italy hopes to welcome.

Finance, however, remains the UK slice that everyone wants to grab. The clearing of euro-denominated derivatives is highly likely to move to the euro area, like the ECB has long demanded. It brings 54,000 jobs, according to consultancy firm Oliver Wyman, which would rise to 232,000 including indirect jobs, according to the classified report by Ernst & Young for the London Stock Exchange.

The report was presented by the CEO of the group, Xavier Rolet, in Westminster with great concern as Paternoster square controls LCH, by far the largest player on the OTC derivatives in euro. Since the Italian Stock Exchange - with all its clearing facilities – is part of the LSE, the idea of a presence in Milan for the Euro Clearing makes sense. More sense, we believe, than many other competitors, even if the German ambition is known: recreate in Frankfurt the ecosystem that centuries of history have generated in London.

The feat is considered as impossible. Expectations are that many will leave the Square Mile, but no financial district can really replace London. It will be an exodus - in relative terms anyway – across the region. Frankfurt, Paris, Dublin (a possible destination for Lloyds of London), Milan, Amsterdam and so on, on a path of increasing ambitions. “The real winner will be New York, the only place where it could make sense to go back,” US bankers in the City said. Maybe, but there will have to be a presence in Europe, in the Eurozone, and it cannot be fictional. The idea of pretending to be in the EU while continuing to work in London has come to many but it's difficult to achieve. Unless the EU wants to commit suicide after the spectacular hara-kiri that the UK has staged against himself.


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