Wall Street titans have come to dominate London finance. Now they have the most at stake as they face Brexit's final reckoning — and with less influence than they are accustomed to.
Banks such as Goldman Sachs Group and J.P. Morgan Chase & Co. use London as their base for doing business with European Union clients. Now, they are torn between the impulse to keep a big presence in the financial hub and their frustration at the U.K.'s go-it-alone approach as it prepares to leave the bloc Friday.
The big U.S. banks have been regularly meeting with officials from the U.K. Treasury to emphasize the importance of winning so-called equivalence from the EU, which would allow them to largely keep their current structure, according to half a dozen bankers who spoke on condition of anonymity. But the U.K. government has expressed determination to forge its own path.
At a dinner hosted by BlackRock Inc. at the World Economic Forum in Davos, Switzerland, Chancellor Sajid Javid said he was prepared to diverge from EU financial services rules, according to people present who asked not to be named discussing a private meeting. Bankers at the event included HSBC Holdings Chairman Mark Tucker and Douglas Flint, chairman of Standard Life Aberdeen. Both firms and BlackRock declined to comment on the dinner.
U.S. firms have for decades ridden the gravy train of trade with Europe via London, which is also the world's hub for the $6.6 trillion-a-day currency market and the quadrillion-dollar swaps market, among others. They increased their share of total Europe, Middle East and Africa investment bank revenue to 53% by the third quarter of 2019, up from 44% six years ago, while their European peers' share fell to 47%, according to data from Coalition Development.
Britain has long been a host for global capital. According to 2015 figures from the Prudential Regulation Authority, foreign banks oversee almost half of all banking assets in the U.K.
"U.S.-headquartered banks that use London as their Europe hub are most concerned" about Brexit, said Sebastian Barling, financial regulation partner at Linklaters. "Ideally they want to keep London as their main base and that works with a good long term equivalence determination."