The EU financial affairs subcommittee of the House of Lords continues to take evidence for its inquiry – Brexit: Financial Services. At the committee last week, Anthony Browne, chief executive of the British Bankers Association, reported that UK based banks have not decided whether to move operations overseas at the moment.
There is much to be said for this “wait and see” approach. Before making a decision to move the banks will have many different matters to consider. From an employment perspective alone there is plenty that should be taken into account. Many European jurisdictions have a higher level of regulatory protection for employees. In particular there may be an increased amount of worker participation and collective bargaining arrangements. For example, in Italy a national collective bargaining agreement for the banking industry regulates terms and conditions of employment, such as minimum salary, holidays, sick leave, notice period and, for executive level employees, indemnities for unfair dismissal. Germany, however, has indicated that it may be prepared to water down strict employment laws for those who earn a significant amount of money, in order to encourage bank relocations. In addition, there may be specific banking employment regulations which would affect the terms and conditions which apply. Although many European jurisdictions will have adopted CRD IV in the same way as the UK some jurisdictions may have gone further. In the Netherlands for example, employee remuneration in relation to bonuses is limited to 20 per cent of the individual’s annual base salary (as opposed to 100 per cent or 200 per cent) allowed in other jurisdictions.
In addition to the employment terms which apply in other jurisdictions there will also be the additional costs involved in relocating staff from the UK. Employers will want to retain key staff in whom they have already invested time and training. Banks will therefore need to consider how such staff can be encouraged to move location, perhaps by way of some retention bonus. Other considerations will apply such as whether to second staff abroad (thus enabling employees to remain in UK pension schemes for example) or whether to employ staff in the local jurisdiction. For those whom the bank do not wish to retain, or for those who will not relocate, contractual or statutory redundancy payments will be payable to eligible staff. There will also be collective redundancy consultation requirements which apply, requiring both time commitment and potential additional costs.
In view of the issues arising, it is no surprise that banks are adopting a “wait and see” approach. As much as possible, banks wish to avoid disruption to the markets and to one of their key assets, their staff.