Depending on whom one poses the question to, London will either retain or lose its position as financial capital of the world in the coming months. Even though London has one of the most booming economic sectors around the globe, the Brexit vote can easily change that outcome.Eurogroup president Jeroen Dijsselbloem is fairly confident that London will no longer play a role of importance moving forward.
Tough Times Are Ahead For London As A Financial Powerhouse
According to Eurogroup President Jeroen Dijsselbloem, it is necessary for certain things to change. In fact, he feels that the European Union can not allow London to remain the top player in the financial sector moving forward–that is, assuming the UK does not want to be bound by EU financial rules, which does not seem to be the plan right now.
Britain has decided to separate itself from the European Union, and so there is no reason for them to accept EU rules related to the financial sector. While there are rumors regarding undoing the Brexit, it is very unlikely that this will not happen or even be allowed. If the UK does not want to follow the EU’s rules, they will need to be removed from their seat of power in the financial sector.
Eurogroup President Jeroen Dijsselbloem explained it as follows:
“We cannot allow a third country to have access, full passporting rights, to financial service markets in Europe if at the same time we allow them to deviate in terms of capital standards, requirements, consumer protection, etc etc. We can’t allow the financial service center for Europe and the eurozone to be outside Europe and the eurozone and to go its own way in terms of rules, regulations, and requirements.Simply … we can’t allow that to happen.”
Although this statement echoes a lot of truth, it remains to be seen how the EU will respond to this situation. London has been the financial capital of the world for many years now, and it will be very difficult to dethrone the region. A lot of money flows through the city’s infrastructure, particularly in settlement and clearing environments.
The bigger question is who would replace London as the new financial capital of Europe, and perhaps even the world. For now, it seems there is no particular candidate to fill this void anytime soon. Although every capital city can be considered as a contender, there is no clear favorite to take over from London.
One thing’s for sure, though: it is of the utmost importance to limit the impact of the Brexit on both sides of the Channel. This historic decision will not only affect the UK economy but can also hurt the European financial system. Dethroning London can potentially shift the brunt of the fallout to the UK, rather than the European Union.
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