Paris and Other European Financial Markets After Brexit

Christian NOYER * Former Governor, Banque de France; in charge of a mission on the attractiveness of the Paris financial market after Brexit. Contact: Christian.NOYER@banque-france.fr.

Triggered by the exit of the United Kingdom from the European single market, the relocation of financial activities towards the European Union is significant. It covers all branches: banking, markets, insurance, asset management. The transition is nevertheless not ended, because European regulators have allowed time and steps to relocate.

An estimate done in spring 2021 counted 440 firms concerned, 900 billion pounds of banks balance sheets and 7400 jobs. The reality today is certainly significantly higher. Several financial places of the European Union have benefited, but Paris appears the only one to have received from all branches of the financial industry, and the place where market activities are concentrating.

Paris displays several assets: its talent pool, the city's attractiveness, the reputation of its regulators, the dynamism of its actors. There remains nevertheless handicaps that take time to correct, essentially on the side of tax and benefits costs (social levies, production taxes), which justifies a pursuit of competitiveness efforts.

The trend towards relocating some financial activities to the European Union (EU) is undeniable, even if it has remained circumscribed up until now. This trend was inevitable. Indeed, once the United Kingdom chose to leave the single market, it also gave up freely providing services within that market – in other words, in order to access most customers (individuals or businesses) located in the EU, it became necessary to operate from a legal entity located there. The reason is simple: it flows from just how the single market was designed in the 1990s (at the urging of the British in particular!). The underlying concept was clearly to establish that all would be subject to the same regulations (European directives or regulations) and to the same judge who interprets these regulations (the Court of Justice of the European Union (CJEU)),…