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Abu Dhabi, UAESunday 18 November 2018

JPMorgan among top banks leading $283bn Brexit move to Frankfurt

The major US investment banks are planning to shift assets to Frankfurt as Britain heads for Brexit

Offices of banks, including JPMorgan Chase, Citi, HSBC, and other institutions in London's Canary Wharf.  Major banks are shifting assets to Frankfurt as Briton heads for Brexit. AFP
Offices of banks, including JPMorgan Chase, Citi, HSBC, and other institutions in London's Canary Wharf.  Major banks are shifting assets to Frankfurt as Briton heads for Brexit. AFP

The major US investment banks are planning to shift assets to Frankfurt because of Brexit, a move that would see their balance sheets in Germany grow to about 250 billion euros ($283bn), several people briefed on the matter said.

Goldman Sachs Group, JPMorgan Chase, Morgan Stanley and Citigroup have presented plans to increase the assets held through their Frankfurt subsidiaries tenfold after the UK’s exit from the EU to comply with requirements.

The final size of the assets, including a large chunk of derivatives contracts with EU clients, may change depending on the outcome of Brexit talks. Any shift will likely be very sizable unless banks can keep their EU passporting rights.

Representatives for JPMorgan, Goldman, Citi and Morgan Stanley declined to comment.

Many banks are finalizing Brexit planning with only a few more months before Britain’s planned divorce from the EU and uncertainty about key aspects of the final agreement. They need approval for their plans from regulators, who have recently indicated they want to see more risk-management functions based in the EU after Brexit.

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JPMorgan, Goldman Sachs and Morgan Stanley have all said that they will convert their Frankfurt offices into their EU hubs. Citigroup has chosen Frankfurt as its EU trading hub and recently converted its German legal entity to serve the entire bloc. Bank of America Merrill Lynch has selected Paris as its EU hub.

JPMorgan held $310bn of assets in the UK subsidiary out of total assets of $2.5 trillion at the end of 2017, according to a regulatory filing. Similar disclosures were unavailable for the other banks. Deutsche Bank, which had total assets of €1.48tn euros at the end 2017, may shift at least €300bn to Frankfurt as well.

There were 143 foreign-owned banks in Germany at the end of September that had combined balance sheet assets of €1.14tn , according to Bundesbank statistics. Though US banks are likely to be among the banks planning the biggest balance-sheet shifts as a result of Brexit, other banks that have picked Frankfurt as their EU hub such as Standard Chartered, UBS or Nomura will likely shift balance sheet to Germany’s financial capital as well.

Hubertus Vath, who heads a lobbying group for Frankfurt’s financial industry, said in a statement following Bloomberg’s report that such moves would represent an “enormous increase in the importance” of the city as a trading hub. Mr Vath said he expects more banks to follow suit.