Brexit could lead to a fragmentation of the financial services industry in Europe, incapable of fighting against major financial hubs like New York and Singapore, a senior Italian official told CNBC in an exclusive interview.
“There’s a danger in fact. We are concerned because having an easy and relatively cheap access to market capitals here in London is very important for our industry at large. We’d not like seeing all the activities shifting from Europe to New York or Singapore. We’d all lose out in this case,” Pasquale Terracciano, the Italian ambassador to the U.K. told CNBC Monday.
Italian officials are therefore campaigning to attract asset managers and private equity firms to ‘complement’ rather than ‘compete’ with the City of London, as the U.K. prepares to leave the European Union and with it losing access to passporting rights – the ability that allows financial services firms in the U.K. to run operations and offer services throughout the European Economic Area.
“This is what could make the pitch from Milan different from Frankfurt…Milan isn’t pretending to be in a position to become the new London,” Terracciano said.
He cited good connectivity, international universities and an attractive fiscal discipline as the top-selling points of Milan. And not even the so-commonly mentioned weak banking system nor political instability make Milan less attractive, the ambassador said.
“It’s so commonly mentioned when we talk about Italy that it is no longer credible,” Terracciano, said about the financial and political concerns overshadowing the Italian economy.
“Sometimes it really sounds like an easy way to fend off a challenge coming from Milan or Italy…If you look at the situation here (in the U.K.) I don’t know what could be considered more stable, after all, yes we have changed prime minister but the party in government is still the same for the last four years and policies, reforms, programs adopted have been implemented,” he said.
Terracciano also noted that Italy has solved the big threats to financial stability by rescuing Monte dei Paschi and the two Veneto banks and also by creating a fund to help banks offload their bad loans.
“NPLs by themselves aren’t a threat to stability….it’s nevertheless a serious story because it has implied a lower growth but it is not a problem of instability or safeness of the banking system,” he added.
Milan is also eyeing the European Medicines Agency (EMA), which is responsible for the scientific evaluation, supervision and safety monitoring of medicines in the EU. The latter is currently based in London, but it will have to find new headquarters once the U.K. formally exits the member bloc.
Terracciano told CNBC that Italy has applied to become the agency’s new host. “We are building a human techno pool, the biggest research centre in Europe for life sciences,” Terracciano mentioned, saying that it would be “mutually reinforcing” with an EMA in Milan.
Brexit could fragment financial services, warns Italy ambassador