Two days before Britain decides on whether it wants to remain in the European Union or take an exit, the largest US banks are preparing for a catastrophic scenario that could cost them billions of dollars.
Amid the volatile atmosphere in Britain, the banks are outwardly keeping a straight face. “We are locked down on this,” said Michael Duvally, spokesman for Goldman Sachs, when asked how his bank is preparing for the possibility of Brexit.
Morgan Stanley and Bank of America gave identical responses.
But in stark contrast, the Wall Street offices of the lawyers who work for the banks are almost under a state of alert, with every option under review, according to banking industry sources.
The vote could have a huge impact on London, where US banks do most of their business for the 28 European Union member countries.
If the Brexit measure goes through, it could lead to Britain losing huge benefits of freely trading with Europe. No longer would US banks be able to easily handle all of their business in EU countries from London.
A vote to leave the EU “would be a negative for the US universal banks since costs could increase and capital market activity could weaken,” analysts at investment bank KBW wrote in a recent report.
After public opinion polls were proven to be greatly unreliable in recent British elections, the banks are warning their traders to expect a very long, busy day of handling buy and sell orders across the financial markets during the 23 June referendum. And the same for the next day.
JPMorgan Chase has already reserved hotel rooms close to its offices for traders . Call centers dedicated to communications with clients have been put into place, several banks confirmed.
One banker said:
Thursday is going to be a hectic day. We are expecting large movements. Our clients are worried about what’s going to happen with the pound. Forex is the biggest concern.
The five big US banks employ more than 40,000 people in London, more than in all of the rest of Europe.
(With agency inputs.)
(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)