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Financial activity leaving London could be replicated in EU, says BoE

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Any wholesale financial market activity that leaves London as a result of Brexit would likely be carried out elsewhere in Europe, according to a Bank of England governor.

In a speech at the Association for Financial Markets in Europe’s annual dinner last week, Bank of England financial stability deputy governor Jon Cunliffe spoke about the challenges for Europe’s financial markets after Brexit.

Cunliffe said it was possible some wholesale activity currently carried out in London and elsewhere in the UK could, in future, be carried out elsewhere in Europe.

However, he added that in an environment of financial globalisation, factors such as transfer of knowledge and labour market externalities have become ever more important.

Cunliffe said: “It is conceivable that given time these effects and the benefits they bring in terms of more efficient allocation of capital and risk could be replicated elsewhere in Europe. It is in my view more likely that if they are lost in London they would be lost to Europe – for the foreseeable future at the least.”

He explained: “Fragmentation of wholesale financial markets activity in Europe, to the extent it occurs, is likely to have a general cost to European economies, including the UK. And to the extent that the transition to whatever new arrangements will apply is not orderly and smooth, the costs and risks will be greater.”

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