Europe's capital markets renaissance is only just beginning
Although some bankers, keen on London life, are scrambling for ways to avoid having to move to the EU, further relocations due to take place this year will help build the critical mass needed for a vibrant pool of talent to emerge in hubs like Paris and Frankfurt.
GlobalCapital has been reporting on plans to move capital markets bankers out of London — and the lack of clarity over who exactly needs to move — since 2018.
Three years on, it seems that the answer to that question will remain nebulous, with the European Central Bank and national regulators offering a running “commentary” on staffing plans while reserving the right to move the goalposts as they see fit.
But it also seems clear that the balance will only shift in one direction — towards the EU.
Back in 2018, many firms characterised their blueprints for bolstering headcounts in the EU as contingency plans in case the UK’s trade negotiators were unable to secure passporting rights. This year, with no such agreement in sight, the back-up plans are being deployed.
More moves from London this summer will add to the thousands of bankers who have already jumped to Paris, Frankfurt, Dublin, Amsterdam and Luxembourg in the past few years, at various levels of seniority and in a range of jobs, from sales and trading, to origination and syndicate.
“The centre of Paris now feels more like Canary Wharf than it did before,” said one headhunter.
The rationale for keeping everybody in London was dealt blow after blow. It may have seemed unthinkable at one point that bankers would be happy to leave such a global city for somewhere less so and that London's network effects would help it remain the dominant European financial centre. But after Brexit forced banks to accept the fact that they would have to spread their staff around, Covid-19 lockdowns proved that bankers could work effectively from alternative locations, while bankers themselves have seen the benefits of that flexibility for the first time in their careers.
While it is unlikely home working will persist for much longer, the offices of US, Asian and UK banks in EU capitals have shed their status as provincial outposts, making them more viable locations for hiring and training junior bankers. That, of course, makes perfect sense. Institutional reputations cross borders, while at heart, capital markets are about personal relationships, no matter what postcode the protagonists sit in.
But make no mistake, this new spread of European offices will not mean an instant wave of new faces. Banks that had hoped Brexit would be an opportunity to save money by replacing Londoners with cheaper locals in France and Germany were disappointed to find that the talent pool on the ground was too shallow, making costly relocations the only solution.
But over time, with local desks better established, the numbers of capital markets bankers permanently located away from London will grow. Staff that made the move will bed in and lay down roots. New recruits will join them, safe in the knowledge that they won't be missing out by being located in the EU any more than a US bank staffer would in the London office as opposed to working on Wall Street.
The capital markets crowd were already an international bunch; now they will have the addresses to match.