Mersch, who was speaking at the LFF’s Focus on 2022 online event on Wednesday, explained that the challenge for Luxembourg and Europe as a whole is now to build a mature working relationship with London. “Unless we have a better working relationship, financial services cannot take the lead for a clear cooperation.”
Following the results of the 2016 EU referendum in the UK, 95 firms chose Luxembourg as their post-Brexit EU hub, representing 17% of all moves, according to London-based thinktank New Financial.
These included the asset-management activities of investment bank JP Morgan, the private equity, real estate and investment advisory services of other asset managers, and myriad insurance activities which chose Luxembourg as their alternative EU hub. This, however, is now likely to now slow down.
“Relocation [to Luxembourg] is now done,” Mackel told Delano in a conversation on Thursday. “Brexit was foreseen for March 2019, so these firms were ready as of the end of 2018.”
Instead, intra-European moves are expected in 2022 in the manner of investment bank Goldman Sachs Bank Europe in Frankfurt’s 2020 decision to locate a branch supporting its European business across the private banking, investment and wealth management space in Luxembourg.
“We’ll see some adaptations and some readjustments, also between Frankfurt and Paris, in the coming years,” said Mackel.
Opportunities to attract new London financial services now depend on competition and not regulation, said Mersch.
“In matters of finance, competition, not regulation, always rewards the best. We have to nurture our activities and make them better before we see relocation,” he said at the Focus 2022 event.
It is particularly important to develop the framework in Europe around the Capital Markets Union, sustainability and digital financial services, explained Mackel. “London will remain the main financial centre in Europe but there could be some levelling out as the framework around these core issues develops.”
As well as discussing the role of financial services in Luxembourg post-Brexit, the LFF event also celebrated the role of governments and central banks in providing banks with the liquidity and credit risk to financially manage the covid-19 crisis. Going forward, it will be important for banks in Europe to consolidate, cooperate and ramp up their cross-border activities in order to manage the phase out of these national and regional forms of support, Mersch said.