Brexit

TAKEAWAY: BREXIT

MAY:  
You mentioned Brexit off the top of your head. I know how much thought you have put into it. In fact, Bank of America decided to have its EU headquarters in Dublin, which you are establishing as we speak. Give me a sense of what you expect for the bank in Europe.

MOYNIHAN:  
Well, if you look at our European operations, outside the United States we work with large companies, multinational companies, both inside and outside the United States, wherever they sit. And we work with the largest investors in the world. A lot of people in this room are our clients on the investment side. We’re not in retail businesses and wealth management business, so we’re not susceptible to the general economic moves, but we are concerned.  

So, what are we doing? We're spending a lot of money with no customers getting one thing better than they had before, so we are basically dividing a system that was aggregated into one into two. There’s no feature functionality, or client capabilities, or new risk we’ll take. It’s—I don’t know, what are we, Anne [Finucane]—$300 million or $400 million in this thing? And we don’t even know exactly what the rules are going to be. So, if you multiply it times all the people—and we’re moving people around, we’re disrupting real people’s lives—this is not good for Europe in the near term in terms of just disruption.

Then the negotiations are very difficult. Those of you who know the Ireland situation, the border situation’s almost impossible to figure out, and you see them ebb and flow on that. And then you have things that are very easy to agree to, which is like packaging on goods and services. You know, nobody’s going to change a candy bar wrapper. There’s no reason to, so that’ll go through easy. But the border and then ultimately how you want a financial service to operate. And I think the mistake that could be made here is Europe had never really aggregated financial services, and therefore they didn’t have deep capital markets. Therefore, when the crisis hit, they could never move the assets off the balance sheets of the financial institutions into markets and reposition them. And they’re still struggling with that today.

This now takes one of the larger economies and divides it away from the others. The two sets of rules—you know, you can’t have common prospectuses for mutual funds—all that stuff goes away, so you end up with two sets of rules. You’re disaggregating liquidity and stuff, and it’s not going to be good for the economy. So, it puts them back probably 10 to 15 years in the possible development of capital markets, which is critical in a country’s success. At the end of the day, what makes the US powerful is our capital markets and all the capital we can bring to the situation. And that just allows us to develop wealth faster for people, and companies get access to capital a lot faster. Europe doesn’t have that, and this is going to put it back a few years.