On Jan. 1, 2021, four and a half years after the UK voted to end its membership in the European Union, Brexit, as the pullout was dubbed, became a reality. The UK’s decision to pull out of the EU after more than 40 years resulted in the loss of unrestricted access to the 27 EU member states, along with new restrictions, border rules and regulations for individuals and businesses.
With the loss of full access to the single market, financial services firms were forced to make significant changes if they were to continue to do business in the European Economic Area (EEA). With the original cut-off date set for March 2019, UK-based financial services businesses began arranging to set up new entities and shift staff, assets, risk management capabilities, and investment services from the UK to other EU member states. Some 500 firms in banking and finance in the UK relocated part of their business, or set up new entities in the EU, according to Brexit & The City: The Impact So Far, a report by London-based think tank New Financial, and many of those firms favoured Germany, Ireland, France, the Netherlands and Luxembourg.
For Scotiabank, Ireland was the obvious choice for its EU business, Nicola Vavasour, CEO, Scotiabank Ireland, says. “We’ve had a presence in Ireland since 1966, and it made sense to leverage the platform and banking licence we already had.”
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Photo: Nicola Vavasour, CEO, Scotiabank Ireland
Scotiabank’s EU business includes trading in Debt Capital Markets, European Government Bond Trading, Collateral Management & Funding, Corporate Derivatives, and Foreign Exchange activity, as well as some presence in Equities with Prime Services.
“What differentiates Scotiabank when we present our product line is its America’s strategy. Our clients have come to rely on Scotiabank for our unique Americas footprint and the access we can provide them into those markets,” says Pauline Donohoe, Managing Director and Head, Capital Markets, EEA for Scotiabank. “We work to ensure we offer our whole bank to our clients, providing access between Europe and the Americas.”
More than a quarter of the financial services firms that moved their EU business out of the UK relocated to Dublin, according to an article in The Irish Times. Aside from it being the only other English-speaking country in the EU, Ireland offers a business-friendly environment, a highly educated workforce, and currently the third lowest tax rate in the EU. In addition, the Common Travel Area arrangement between Ireland and the UK allows British citizens to live and work in Ireland without restrictions.
Pre-Brexit, Scotiabank had access into Europe through both Dublin and London. Scotiabank (Ireland) Designated Activity Company, or SIDAC, was primarily focused on Treasury Investments and Corporate Lending, while the Bank’s London operations primarily handled Corporate & Investment Banking and Capital Markets products and services for the Bank’s UK and European clients, working with teams across its global footprint.
“We are now the primary relationship manager for all EEA clients for the Bank, but we use the global operating model, leveraging Scotiabank’s product and industry specialists across our entire footprint,” Vavasour said.
Pivoting the EEA Capital Markets business to SIDAC was a massive undertaking that took about a year, said Vavasour, who credits collaboration from groups across Scotiabank’s global footprint for making it possible. “Dublin and London were the primary teams involved but we received great support from New York and Toronto and even further afield,” she said.
To ensure a smooth transition the team set up strong governance structures and undertook a review of clients and products to determine what its clients needed and wanted. One of the more detailed processes was with the Bank’s Irish regulator, the Central Bank of Ireland, for the Capital Markets application, Vavasour said, while noting it was somewhat eased by the fact the Bank already had a strong governance framework in place and a long history in Ireland.
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Photo: Pauline Donohoe, Managing Director and Head, Capital Markets, EEA for Scotiabank
The approval was granted at the end of September 2021 and the Bank’s new Dublin Capital Markets team executed its first trade on Oct. 15. Business is gradually scaling up, Donohoe said, as the team gets to work. She expects the business will see steady growth in clients and revenues.
“Thanks to the efforts of many teams across Scotiabank, this has been a smooth transition that enables us to continue to support our clients, facilitating investment flows between Europe and the Americas,” says Peter Heidinger, Managing Director and Head of Global Banking and Markets Europe for Scotiabank.