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Brexit pushes high earning bankers from UK to EU

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The number of European Union bankers earning more than one million euros has reached new highs after Brexit, as lenders shift more key staff to the continent. The number of high-earning bankers in the EU increased by 41.5 per cent in 2021 to reach 1,957, according to new figures from the European Banking Authority — the highest since the regulator started, in 2010, tracking those earning more than 1m euros.


The watchdog said that some of this was down to an increase in bonus payments, as banks hauled in record fees from dealmaking and trading revenue swelled during a bumper year. But Brexit was also big factor, the EBA said.


“The relevant increase of the number of high earners is linked to the good performance of institutions in the area of investment banking and trading and sales, as well as to further relocations of staff after Brexit from the UK to the EU, and also to overall salary-level increases,” the EBA said.


The UK has typically been the centre for high-earning bankers in the EBA figures, but the country has been excluded from the report since it left the EU in 2020. The number of bankers earning more than 1m euros has continued to grow, however, as banks have moved top staff away from the City.


Germany now houses the most high-earning bankers, with 589, according to the EBA data, followed by France with 371 and Italy with 351. The highest proportion of those earning more than 1million euros work in investment banking (38 per cent), followed by those in management functions.


On a separate issue: London dominates clearing despite EU bid for market share. British clearing house group LCH (London Clearing House) continues to dominate the market for interest rate derivatives, despite efforts by the EU to bring business back onto the mainland from the UK after Brexit.


LCH, which is part of the London Stock Exchange Group, cleared 50.9 trillion in Euro-denominated swaps referencing the Euribor rate last year – some 94 per cent of the market – according to data from research firm Clarus. Eurex Clearing, which is operated by Deutsche Borse and is its biggest EU competitor, took most of the remaining 6 per cent, with just 3.5 trillion’s worth of clearances.


Last January, the European Commission extended its equivalence deal for UK clearing houses until June 2025. This allowed cross-border business to continue temporarily after Brexit removed British firms’ automatic access to EU markets. But the Commission is now beginning to push EU-based banks to move volume to EU clearing houses.


In December, it proposed that a portion of euro-denominated derivatives traded by EU firms should be cleared in the UK.


It added that “EU authorities would not be in the driving seat for taking the relevant decisions” during times of crisis, as clearing is conducted predominantly outside the bloc. The EU did not say what proportion would need to be cleared in the EU, only that the threshold would be determined by the European Securities and Markets Authority.


Convincing firms to clear their business in Europe could prove difficult. LCH clears not only most Euro products, but also the overwhelming majority of US dollar products, too. It holds a 95 per cent market share in Secured Overnight Financing Rate swaps, clearing $73.8 trillion in 2022.


Euro-dominated contracts, including those traded by non-EU firms, make up 25-30 per cent of the more than $1,000 trillion LCH clears each year. LCH reported a bumper 2022, with record volumes for the clearing house.


Market participants have said it would be difficult to replicate the efficiencies that clearing multiple currencies through one clearing house offers, and could leave EU banks disadvantaged compared to international peers not subject to the same rules. (The writer is our foreign correspondent based in the UK)


andyjalil@aol.com


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