LONDON - Goldman Sachs’ masters of the universe may be about to swap premium sushi lunches for Greggs sausage rolls. The U.S. investment bank is based in central London but has a backup site in less glamorous Croydon, 11 miles out of town. As coronavirus starts to bite, it might have to use it. The issue then for bosses is how temporary to make the arrangement.

Banks in Britain’s capital are readying workarounds so that crucial trading and IT operations stay intact if the Canary Wharf financial centre goes into lockdown. The moves were given added impetus on Thursday when HSBC sent home over 100 employees after a worker tested positive for Covid-19. The bank’s tower is a stone’s throw from Citigroup and Barclays, and a short walk from Credit Suisse, JPMorgan and Morgan Stanley. Commodity pricing agency S&P Global Platts, also nearby, on Thursday told Canary Wharf employees to work from home until further notice.

That’s not an option for bank employees usually based on a trading floor, which are tightly-controlled environments. Regulators like Britain’s Financial Conduct Authority insist on recorded telephone lines, the ability to log orders and trades quickly into bank systems, and easy access to compliance support. Such requirements are harder to satisfy from the living room of an Islington townhouse, so banks will send traders to backup sites away from central London.

Such “site-splitting” could see JPMorgan staff shipped to Basingstoke, a 90-minute drive southwest of the capital. Barclays traders have a shorter trip to Northolt - a 40-minute tube ride from central London. Commerzbank, which is sending some Frankfurt-based trading and treasury staff to the outskirts of the German city, said in a statement that if an infection occurred, at least one team would be able to continue working.

The exercise may get cost-focused bank chief executives thinking. If a small team based in a cheaper part of town suffices for most critical functions, why move them back? Top-tier City of London offices cost about $90 per square foot, Savills reckons, compared with around $45 for the rest of London and the southeast. One on the same road as JPMorgan’s Basingstoke data centre is $21 per square foot.

Coalition data shows global investment banks on average only generated 7.5% returns on equity last year. There are savings to be made. And if Goldman’s demigods need any more convincing, Greggs now serves vegan sausage rolls.

CONTEXT NEWS

- HSBC on March 5 sent home more than 100 staff in London after a worker tested positive for Covid-19, the first known case at a major company in Europe's main financial hub.

- Banks worldwide are readying out-of-town offices and isolating some teams to ensure trading operations continue if the virus spreads to more financial centres.

- Commodity pricing agency S&P Global Platts told employees at its Canary Wharf office to work from home until further notice after a visitor was diagnosed with the coronavirus, the company said on March 5.

- JPMorgan is moving traders in New York and London to a number of locations, it said in a memo on March 5. The U.S. bank runs a British disaster recovery site in Basingstoke, southwest of London. "The bank has officially moved from testing to execution," Reuters reported citing a source familiar with the matter, who added that the biggest wave of moves would happen on March 9.

- Goldman Sachs has been testing a backup site in Croydon in south London, while Barclays has an office in Northolt, in the city's northwest, that it plans to use as a backup. Spain’s BBVA said on March 6 it had transferred staff from its Madrid trading floor to a location just outside the city, in a contingency measure against potential disruption by the outbreak.

- The European Central Bank has asked euro zone banks to urgently test their large-scale remote working or other flexible arrangements for critical staff, a letter dated March 3 and seen by Reuters showed.

(Editing by George Hay and Karen Kwok)

© Reuters News 2020