Frankfurt and Dublin are emerging as the winners of the race race to snap up the post-Brexit banking spoils, a board member of Germany's Bundesbank has said.
Bundesbank board member Andreas Dombret has told Germany's Der Spiegel magazine that 20 big financial institutions are in negotiations to shift their operations to the banks of the river Main in Frankfurt.
“We are in the decisive phase of location decisions ... and it is clear that Dublin and Frankfurt are profiting particularly,” said Mr Dombret. “Above all, the big American banks are concentrating themselves on these two cities.”
According to Mr Dombret, responsible for banking regulation, the British-based institutions are looking for more than just a German banking licence to continue trading inside the EU. They are anxious to shift entire brokerage, investment banking and traders operations.
Morgan Stanley and Goldman Sachs are among the biggest operators in these areas.
For the Bundesbank, the price for a banking licence in Germany will be adherence to German and European banking rules and a serious, sustainable presence in Frankfurt – not a brass plate operation – Mr Dombret said.
“We are demanding from the institutions that they build up qualified personnel for all core areas: management, risk management, compliance, anti-money laundering and finance departments as well as critical IT functions. And that has been agreed.”
The Bundesbank and state government of Hesse have lobbied hard for Frankfurt, citing proximity to the European Central Bank and the euro system’s largest member bank. In addition, they point to high standards of living in the central Main river region, strong infrastructure and good schools.
One of the first institutions to up-sticks is likely to be Deutsche Bank, which is expected move to Frankfurt several thousand of its 9,000 employees in London in its clearing, risk control, legal and reporting departments.
Morgan Stanley is doubling its Frankfurt presence, as is Goldman Sachs.
A year after the Brexit vote, most German banking analysts say it is clear that there will be no one big winner from the shift away from London.
Head-count boost
Germany’s banking association expects between 3,000 and 5,000 jobs to be shifted to Frankfurt in the coming two years. At least a dozen banks in Frankfurt will expand their pre-existing operations, it forecasts, boosting head counts by up to 400 employees each.
“There won’t be a Brexit bang and suddenly thousands of bank employees are with their families in Frankfurt,” said Mr Stefan Winter, head of the German banking association. “In five years, Frankfurt will feel the Brexit effect more strongly than in two years.”
A similar view is shared by the head of Bafin, the federal financial supervisory authority.
"Frankfurt is playing a leading role," Bafin president Felix Hufeld told Der Spiegel. "Most of the big banks are pursuing a strategy of not putting all their eggs in one basket."
In Ireland, Citigroup and JP Morgan have announced plans to expand in Dublin as a result of Brexit, with Bank of America Merrill Lynch to apply for a broker-dealer licence here, as it moves certain activities from London.
