‘Brexit’ Wouldn’t Be Disaster for U.K., Says UBS Chairman 

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Axel Weber said Britain would probably get a good deal if it voted to leave

The chairman of one of Europe’s biggest banks said Tuesday that if the U.K. decided to leave the European Union it probably wouldn’t deal a major blow to London’s status as one of the world’s top financial hubs.

Axel Weber, chairman of Switzerland’s UBS AG, said at an event hosted by The Wall Street Journal that Britain would probably be able to negotiate a deal giving it access to the EU’s vast single market for goods and services if its citizens vote to leave in a coming referendum.

“I don’t think it would completely undermine the financial sector of London,” he said, at a WSJ Pro Central Banking event in London, referring to a British exit from the EU.

Mr. Weber acknowledged an exit could throw up challenges for London’s financial center but said UBS probably wouldn’t immediately seek to move operations out of the capital if Britons voted to leave. If the U.K. voted in favor of Brexit, “I think there would be two years of heightened uncertainty but pretty much the same rights for market access,” he said.

The bank would “wait for the dust to settle” and see what kind of deal the U.K. was able to negotiate, Mr. Weber said. UBS employs roughly 5,000 people in the U.K. in its investment banking and wealth management businesses. London’s attractions also include its huge pool of talent and position as a global marketplace, he said.

U.K. Prime Minister David Cameron has pledged to put Britain’s membership of the EU to a public vote by the end of 2017. Mr. Cameron has said he would campaign for the U.K. to stay in the union provided he can secure a new deal for Britain in areas including welfare, sovereignty and immigration. Mr. Cameron is due to spell out his objectives in a letter to European Council President Donald Tusk on Tuesday.

In wide-ranging remarks on banks, financial markets and the global economy, Mr. Weber also said Tuesday that he expects compensation levels across the banking industry to remain broadly flat in the coming years.

Strong-growing U.S. banks are still “pacemakers” and have been able to maintain pay for their best performers, forcing other bank to follow suit, he said. However, Mr. Weber said he expects more pay to be deferred in the future as regulators continue to pressure banks to spread bonus payouts over several years. A pay structure where bankers have more “skin in the game” is more sustainable, he said. Overall, U.S. banks have been able to ride their country’s economic recovery, especially its deep capital markets, to strengthen their balance sheets. European lenders continue to rely on traditional lending to businesses and individuals, which has remained soft over the past few years.

‘Central banks have become the core players at the center of financial markets. They were never designed to be that.’

—Axel Weber, chairman of UBS

Mr. Weber served as president of Germany’s Bundesbank and was a member of the European Central Bank’s governing council until 2011. He remains an influential, if controversial, voice in European economic policy circles.

A critic of the large-scale asset purchases undertaken by central banks in recent years, he said Tuesday that the ECB’s expansionary policies have eased pressure on governments to implement much-needed labor market reforms and other policies to lift long-term growth in Europe.

“Central banks, while preserving the status quo, are creating the wrong incentives long term to make our economies turn the corner,” he said.

Mr. Weber also expressed skepticism at the expansion of central banks’ roles in the wake of the crisis that tipped the world into recession in 2008. Many are now responsible not just for keeping inflation under control but for supervising banks and maintaining financial stability.

“Central banks have become the core players at the center of financial markets. They were never designed to be that,” Mr. Weber said.

Source: WSJ – ‘Brexit’ Wouldn’t Be Disaster for U.K., Says UBS Chairman

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