Borders and balance sheets: How immigration policy is reshaping markets and banking risk

In the past few months, a wave of immigration policy shifts has swept across the Western world. For anyone tracking the rapidly shifting geopolitical and macroeconomic landscape, this is no surprise. But recent moves by the White House and Downing Street have cut through the noise – and markets are paying attention.

In Washington, President Trump announced a halt to international student visas for Harvard and other major US institutions, reigniting legal battles and raising alarm across the education and tech sectors. Meanwhile in London, the Labour government released a white paper pledging to “restore control” over immigration through tighter skilled worker rules and settlement pathways.

While these measures may score political points at the margins, markets are signalling something else with the Nasdaq dipping 1.5% the day after Trump’s announcement. The deeper concern, however, lies in the structural impact these moves could have – not just on sentiment, but on the financial industry’s operational resilience, talent strategy, and long-term risk environment.

Labour markets and statistics: Some perspective

In the US, immigrants comprised 23% of all STEM workers as of 2019, up from 16% in 2000. According to the American Immigration Council, foreign-born workers represented 26.1% of computer and mathematics professionals and 20.7% of management, business, and financial workers in 2019. Meanwhile, the Migration Observatory at the University of Oxford reported that foreign-born individuals constituted 21% of the UK's employed workforce in Q1 2024. The implication is clear: these economics rely heavily on foreign talent to maintain their competitive edge in the technical and financial sectors, and any disruption to that flow, will ripple across key industries.

Corporate & investment banking: Systemic exposure

Talent supply and recruitment

The banking sector thrives on access to skilled human capital – especially in roles such as quants, software developers, risk analysts, and client-facing advisors. Naturally, immigration policies determine how easily banks can hire internationally or retain foreign graduates.

To mitigate shifting trends and new policies, banks have increasingly internationalised their workforce distribution with some turning to remote work arrangements. In the US, firms heavily utilise the OPT (Optional Practical Training) programme to hire international MBA and STEM graduates for up to three years, during which time they attempt multiple H-1B or green card applications for permanent settlement. Similarly in the UK, the graduate visa route has been increasingly used to hire graduates for 2 years (up to 3 years for PhD students) as a bridge to the skilled worker route.

However, administrative burden and new salary thresholds mean some junior roles are harder to fill with non-UK candidates. Non-British junior bankers are being “locked-out” of City jobs in smaller banks because of sponsorship requirements. The concern for UK banks isn’t just about elite hires, but more about volume and friction.

One adaption is relocation within the business group. Post-Brexit especially, thousands of roles moved to EU offices for market access, and now talent access is another reason. If London becomes too restrictive or costly for hiring foreign talent, banks might increasingly concentrate more hires in European hubs or even offshore in overseas centres.

Operational & compliance risk

Banks must ensure they comply with labour and immigration laws in every jurisdiction they operate. In the UK, Home Office audits of sponsor license have increased, and visa delays are mounting with increased cost. These pressures raise legal, operational, and reputational risks.

Globally, compliance budgets are seeing double digit increase while global mobility and HR compliance functions, often with legal counsel support, must navigate the patchwork of rules.

Credit and market risk

All this adds up to immigration policy influencing macroeconomic conditions that feed into credit models and market risk scenarios.

Consider a labour shortage risk: if immigration is restricted, wage inflation may rise in industries like healthcare, agriculture, or hospitality – impacting profit margins, default risks, and debt-servicing ratios. Credit analysts must account for this in sectoral stress scenarios. A shortage of nurses or engineers, for example, may raise risk weights for hospital or infrastructure borrowers.

Real estate lending is another area. In Canada and Australia, for example, strong immigration has been boosting housing demand, so banks’ mortgage growth and property price outlooks have been built on that trend. Now, as Canada taps the brakes on immigration, banks might need to temper their housing market forecasts which feeds into loan-to-value assessments, credit growth projections, etc.

Geopolitical and reputational risk

US-China tensions have spilled into student visa issuers with the US restricting visas for some Chinese STEM students citing espionage concerns. Banks operating in China or serving Chinese clients must be aware of how such moves might affect their business needs – one notable example is wealth management divisions noting Chinese students who bring capital for tuition and living could impact banking flows.

From a business reputation perspective, it’s a minefield. Banks need to tread carefully; they want to be seen as fair employers. They need to avoid being criticised for either abusing visa programmes or conversely, for not supporting immigrant employees enough. As ESG (environmental, social governance) expands to include employee rights and political risk, immigration is becoming part of the S and G.

Strategic shifts by banks

Relocation of operations

As noted, Brexit prompted a relocation of banking roles from London to EU cities with over 7,000 finance jobs moving to the mainland by 2022. In North America, banks are expanding tech and quant hiring in Toronto, Vancouver, and Montreal – not just for cost efficiency but as a hedge against US visa volatility.

Remote work and distributed teams

The pandemic normalised remote delivery for CIB functions. Now, that flexibility is being used tactically to bypass visa barriers. Banks are increasingly hiring from abroad without relocation, particularly for niche quant, dev, or cyber roles. This model still poses challenges specifically, data governance, time zones, and control functions. But investment in secure collaboration tools is enabling it. Some teams are even using a “hub and spoke” hiring model, centralising management while diversifying technical execution across borders.

Conclusion: The talent equation as a risk variable

Immigration has always shaped economies, but today it is emerging as a core variable in financial risk – not just a political or social issue. As Western governments tighten visa pathways, impose caps, and increase bureaucratic friction, they are reshaping the talent equation that underpins not just productivity but the resilience and competitiveness of their financial sectors.

For CIBs, this is not a theoretical concern. Immigration policy now intersects directly with core areas of risk management: operational exposure, compliance burden, credit modelling, reputational positioning, and even macroeconomic assumptions baked into lending and asset allocation strategies. Markets are responding – in equities, in real estate forecasts, and in investor sentiment around future growth.

This leaves banks with a difficult balancing act. They must continue to hire globally, manage politically sensitive reputations, and build new workforce models – remote, distributed, and jurisdictionally agile – while navigating an increasingly fragmented immigration landscape.

The message to policymakers is equally clear: if immigration is treated solely as a political football, it risks becoming a drag on the very economic growth and financial stability these governments seek to protect. A coordinated, skills-based, and market-aware immigration strategy is not just humane – it’s smart policy.

If talent is capital, then borders are no longer just about sovereignty. They are balance sheet risks.

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