Before taking steps to ease the impact on its business, Wells Fargo & Co. won’t wait for the U.K. to formally trigger an exit from the European Union.
Frank Pizzo, president for Europe, the Middle East and Africa, said in an interview at the Sibos financial-services conference in Geneva that Brexit could reduce income from Wells Fargo’s securities and asset-management businesses as they rely on the U.K.’s right to sell services freely into the EU.
According to Pizzo, who is based in London, in case the U.K. loses those so-called passporting rights, a new subsidiary in a location such as Frankfurt, Paris or Amsterdam is one of the options being considered.
“We’ve identified potentially the revenue that could be at jeopardy with the loss of passporting and we’re coming up with the options to mitigate that,” Pizzo said. “We’ll be sharing that with senior management of the bank and also our recommendations,” as soon as next month, he added.
After Britain voted in June to leave the EU, bBottom of Form
anks and asset managers with European headquarters in the U.K. face uncertainty. As they prepare to shift jobs abroad, financial firms have been scouting the continent for office space even as the terms for the split haven’t been negotiated. They may move some operations outside the U.K., firms such as insurer Lloyd’s of London Ltd. and Swiss bank UBS Group AG have indicated.
According to Pizzo, among the U.S. banks poised to make decisions on how to respond to Brexit are Wells Fargo, along with JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc.
“Nobody can afford to wait,” he said.
According to Pizzo, Wells Fargo plans to grow its correspondent banking and real estate finance businesses in London despite the Brexit vote and the bank, headquartered in San Francisco, serves corporate and institutional clients in the EMEA region. The bank’s passporting rights regardless of Brexit, and offices in Luxembourg and Milan would be retained by the company which also has a bank in Ireland inside the EU.
Pizzo said that most operations will be consolidated as planned in the building known as 33 Central that the bank agreed to acquire in July in the City of London district and its 900 staff in London would work out of there.
He said that after a lull in the run-up to the referendum, more companies are seeking advice from London banks on mergers and acquisitions.
“Things seem to be functioning, frankly, in a very normal manner. Some of the pundits that felt the economy was going to fall off a cliff and that the economy was going to immediately slow down, none of that has happened yet,” Pizzo said.
However, there remains a lot of market uncertainty, he warned.
The bank has recently been fined $185 million this month for allegedly opening about 2 million deposit and credit-card accounts without authorization by the U.S. Consumer Financial Protection Bureau and this has sent the senior management in a “period of deep reflection” in the U.S. Pizzo said that the fallout is an ongoing problem that senior management wants to resolve.
(Adapted from Bloomberg)
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