US bank Citigroup is the latest to choose Frankfurt as its European Union (EU) financial hub in the wake of the UK’s Brexit vote and will transfer some trading activities currently undertaken in London to the German city, according to reports.
Citi already has 350 employees based in Frankfurt and it is anticipated that the decision to expand the bank’s broker-dealer operations there will create a further 150 to 250 posts. This could involve transferring staff currently based in London, hiring locally or a combination of the two. However, it is believed that the UK capital will remain the group’s headquarters for Europe, the Middle East and Africa (EMEA).
The proposal is expected to go before the group’s board of directors for approval this week. Jim Cowles, Citi’s CEO for EMEA confirmed at a conference held in Dublin last January, that Citi was evaluating locations in Germany along with France, Ireland, Italy, the Netherlands and Spain.
However, late last year it was reported that the bank was in discussions with Germany’s federal financial supervisory authority BaFin – widely regarded as the only regulator outside of the UK able to handle the Citi’s complicated derivatives business – on transferring some of its London-based equity and interest-rate derivatives traders to Frankfurt.
Verband der Auslandsbanken in Deutschland (VAB), aka the Association of Foreign Banks in Germany, has estimated that bank relocations from London resulting from Brexit could create 3,000 to 5,000 new jobs in Frankfurt over the next two years. VAB represents the interests of more than 200 foreign banks, investment managers and other financial services institutions in Germany from more than 30 countries.
Citi joins Standard Chartered, Nomura Holdings, Sumitomo Mitsui Financial Group and Daiwa Securities as its post-Brexit EU financial centre in the past few weeks. Deutsche Bank is also thought to be ready to move much of its London-based trading and investment banking assets from London to Frankfurt.
Citi is also in discussions with the European Central Bank (ECB) and regulators in EU nations including Ireland about relocating other parts of its operations.
While negotiations of the terms of a Brexit deal could see the UK maintaining some sort of access to the single market, banks are preparing for a “hard Brexit”, a scenario that would mean no or reduced access. Many are responding with plans to have new or expanded offices up and running inside the bloc before the UK formally departs the EU in 2019.
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