Banks pick Frankfurt as base as Brexit looms

The financial district in Frankfurt, Germany. Many of the world's biggest banks are choosing to move their European Union headquarters to the city from London to ensure continued access to the single market.
The financial district in Frankfurt, Germany. Many of the world's biggest banks are choosing to move their European Union headquarters to the city from London to ensure continued access to the single market.PHOTO: BLOOMBERG

FRANKFURT • Frankfurt is emerging as the biggest winner from last year's Brexit vote, with many of the world's biggest banks choosing to base their new European Union headquarters in the German city.

Standard Chartered, Nomura Holdings and Daiwa Securities Group have picked Germany's financial capital for their EU base to ensure continued access to the single market. Citigroup, Goldman Sachs Group and Morgan Stanley are weighing a similar decision, said people familiar with the matter, asking not to be named because the plans are not public.

Said Mr Stefan Winter, chairman of the Association of Foreign Banks in Germany and head of UBS Group's investment bank in the country: "Frankfurt is well-positioned to receive foreign banks. It's in the heart of Europe, has fantastic infrastructure and affordable office rents."

Frankfurt is a natural pick, given a financial ecosystem featuring Deutsche Bank, the European Central Bank and BaFin, seen by many as the only regulator outside of London capable of handling the banks' complicated derivatives business.

Even as prospects for a British deal maintaining some sort of access to the single market gain traction, banks are still preparing for the worst and want to have new or expanded offices up and running inside the bloc before Britain formally departs in 2019. 

London could lose 10,000 banking jobs and 20,000 roles in financial services as clients move €1.8 trillion (S$2.8 trillion) of assets out of Britain after Brexit, according to think-tank Bruegel. Other estimates range from as many as 232,000 jobs to as few as 4,000.

Among the large banks, Bank of America  views Ireland's capital as its default destination for a new EU hub if Britain loses easy access to the single market, said Mr Nikolaus Naerger, the firm's head of corporate banking in Germany, Switzerland and Austria in March. He added that the bank will likely move some jobs to other cities across the region, including Frankfurt, Madrid and Amsterdam. No final decisions have been made.

AN EXCELLENT CHOICE

Frankfurt is well-positioned to receive foreign banks. It's in the heart of Europe, has fantastic infrastructure and affordable office rents.

MR STEFAN WINTER, chairman of the Association of Foreign Banks in Germany and head of UBS Group's investment bank in the country.

For Goldman Sachs, the plan is to more than double its staff in Frankfurt to 400 as it begins withdrawing personnel from London, Mr Richard Gnodde, the firm's vice-chairman of international business, said.

JP Morgan Chase plans to move between 500 and 1,000 London-based bankers to expanded offices in Dublin, Frankfurt and Luxembourg,its head of investment banking Daniel Pinto said last month.

Barclays has settled on Dublin for its expanded EU base and is planning to add only about 150 staff there, people with knowledge of the decision said earlier this year.

Standard Chartered was in talks with the German regulator BaFin about setting up a subsidiary in Frankfurt and getting a licence to operate across the EU from there, the firm's chairman said on May 3.

Morgan Stanley is also close to picking Frankfurt for its enlarged EU hub, while Citigroup is evaluating locations for parts of its London broker-dealer business, including Ireland, Spain, Germany, France and the Netherlands.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on June 27, 2017, with the headline 'Banks pick Frankfurt as base as Brexit looms'. Print Edition | Subscribe