Deutsche Bank AG, which has said it is moving hundreds of staff to adapt to Brexit, declared client migration was “materially complete” in its earnings last September. Deutsche Bank continues to expect to transfer several hundred jobs from London to Frankfurt once the Brexit transition period concludes, a person familiar with the matter said.
To be sure, the U.S. banks have made progress on their longer term post-Brexit plans. Earlier this month, Goldman signed a 12-year lease in Paris’s 16th arrondissement where it operates one of its broker-dealers servicing European clients, allowing it to double its headcount in the French capital from late next year. JPMorgan bought a seven-floor office building in the historic 1st arrondissement in January with capacity for as many as 450 people -- although that was an estimate made before social distancing became the new normal.
Bank of America Corp, which also has its Brexit hub in Paris, has gone further by committing to a fully fledged sales and trading business on the continent. It has had about 450 staff in Paris since last year and won’t need to add any more in the event of a no-deal Brexit. Citigroup Inc., which already has about 60% of its European staff outside the U.K., is creating 150-200 new roles primarily in Frankfurt as part of its Brexit response.
Some finance employees who are earmarked to work from Brexit subsidiaries in Europe are still physically in London while operating under European employment contracts as the virus interrupts their plans to move, people with knowledge of the banks’ plans said.
Politicians avoided a hard Brexit last year and could still agree to a deal on trade ties. In the past 24 hours, Prime Minister Boris Johnson and European Commission President Ursula von der Leyen have tried to reignite the deadlocked talks. But privately, officials from Brussels and London say they are focusing on reaching an accord between mid-August and a summit of EU leaders scheduled for mid-October.
European regulators have already said they’ll require French and German asset managers to do business through EU banking entities unless a deal is achieved. Regulators have previously put pressure on banks to move staff promptly, although some banks are now expecting a change in stance in light of the pandemic, people with knowledge of the matter said.
“We have seen a lot of dialogue in recent weeks from the ECB and home regulators asking banks to push these things forward,” said Bevan.
Dormant Hubs
Many JPMorgan and Citigroup clients are still funneling business through London, rather than the banks’ EU offices, some of the people familiar with the matter said. The liquidity is still better and it’s cheaper to do business there, the people said. A Citigroup spokesman declined to comment.
Bevan at Linklaters said that while the re-papering exercise has been completed to switch EU clients to new Europe-facing entities, hundreds of asset managers have yet to review the new terms and push the button to activate trading. The scale of the outstanding work could take months to complete, he said.
Stephen Jones, the CEO of trade body UK Finance, expects more bankers to follow those that have already moved from London to European hubs. “But it’s not going to happen overnight, and I hope regulators in the EU will be pragmatic about all this.”