For Big Banks, Frankfurt Is Brexit's Wurst-Case Scenario

If Theresa May forces you to stop being her neighbor, you’re not gonna like where you’re going.
By Thomas Wolf (Der Wolf im Wald) (Own work) [CC BY-SA 3.0], via Wikimedia Commons

By Thomas Wolf (Der Wolf im Wald) (Own work) [CC BY-SA 3.0], via Wikimedia Commons

The future of European banking is beginning to take shape, and in spite of Jamie Dimon’s fervent Francophilia, the shape is that of a hot dog. Citigroup and Morgan Stanley are the latest to set up shop in Frankfurt, and they’re not the only ones establishing beachheads on the Main.

Banks from Japan’s Nomura Holdings Inc. and Sumitomo Mitsui Financial Group Inc. to the U.S.’s Citigroup Inc. are shifting some business to Frankfurt given the possibility that the U.K. will be left out of the single market once it leaves the EU….

“Stability is the one thing all banks are looking for, and in this regard Germany, with its stable economy and politics, is a winner,” said an official at a bank that is shifting some of its business to Frankfurt.

Whether bankers are looking for the kind of sleepy stability Frankfurt offers is, as we’ve pointed out, something of an open question. Based on their continued clinging to the fading hope that Britain’s leaders might yet come to their senses, however, you can gauge just how excited they are to breathe Frankfurt’s fresh air and gaze upon its darkened malls and department stores on a Sunday.

Banks which are shifting operations to avoid disruption once Britain leaves the European Union hope only a handful of people will eventually have to leave London, industry sources say….

If an exit deal is signed that allows, for example, euro-denominated trades to be booked at subsidiaries in the EU but executed from London, then the number of people who move in total could be fairly low….

"Some firms I've spoken to have explicitly said if there is a (favorable) deal they would reverse that," Kent added.

About that

“The national interest and parliamentary arithmetic would dictate some kind of grand coalition on Brexit,” Mr. Bale said. “But the logic of the internal politics of the Conservative Party points the prime minister, and aspirant leaders, away from the obvious solution….”

“Britons are not very honest with themselves,” Mr. Fritz-Vannahme said. “The harder, sharper the Brexit, the harder the economic situation will be.”

Where Will Banks Go After Brexit? Frankfurt Takes Early Lead [WSJ]
Citigroup Said to Open Frankfurt Hub as Banks Consider Post-‘Brexit’ Moves [DealBook]
Morgan Stanley chooses Frankfurt as EU hub post Brexit: source [Reuters]
Banks hope to keep staff in London if soft Brexit deal struck [Reuters]
As ‘Brexit’ Clock Ticks, U.K. Seems Adrift [NYT]