Abu Dhabi, UAETuesday 20 October 2020

Brexit

JP Morgan to shift $230bn in assets from Britain to Europe ahead of EU deadline

Financial services firms moved almost $800bn in assets out of Britain since Brexit referendum in 2016

A pedestrian wearing a protective mask walks past a JPMorgan Chase & Co. bank branch in New York, U.S., on Friday, April 10, 2020. JPMorgan Chase is scheduled to release earnings figures on April 14. Photographer: Mark Kauzlarich/Bloomberg
A pedestrian wearing a protective mask walks past a JPMorgan Chase & Co. bank branch in New York, U.S., on Friday, April 10, 2020. JPMorgan Chase is scheduled to release earnings figures on April 14. Photographer: Mark Kauzlarich/Bloomberg

JP Morgan Chase is moving about $230 billion (Dh844bn) from Britain to Frankfurt ahead of the UK’s exit from the European Union, a move that will make it one of Germany’s biggest banks.

The US's biggest bank aims to complete the migration of the assets to its Frankfurt-based subsidiary by the end of the year, according to Bloomberg, because no agreement on finance will be reached before Brexit is complete. The shift could transform JP Morgan into Germany’s sixth-largest bank, based on the assets of the biggest commercial lenders last year.

"This is an example of what economists had predicted years ago would happen post Brexit and now we are seeing some evidence of it," Fawad Razaqzada, market analyst at London's ThinkMarkets, told The National. "This is clearly not good for the domestic economy, especially if more financial services firms start moving their operations to mainland Europe in the coming years. The UK government must make sure that London retains its competitive edge for financial services, otherwise more will follow."

A spokesman for JPMorgan declined to comment when approached by The National.

As the clock ticks down to the UK’s departure from the single market, international banks with London hubs have been strengthening operations in the European Union to ensure they can service clients based in Europe.

Unless an appropriate agreement is reached before the end of the year, Wall Street banks will be barred from doing investment services business from London with clients such as German and French pension funds.

It is understood that JP Morgan's German legal entity is where the bank will book some transactions, predominantly for European-based clients after Brexit. Therefore any capital addition will ensure it can transact with its clients adequately.

The EU's banking watchdog said in July that lenders using the UK as a gateway to the European Union must fully execute their plans for serving EU customers before the Brexit transition period ends in December.

While JP Morgan has made the biggest shift to Frankfurt, Citigroup, UBS Group and Standard Chartered have also bulked up operations in Germany’s financial hub.

In January, global consultancy EY said financial services firms had moved almost $800bn in assets out of Britain since the Brexit referendum in 2016. A third of the 222 companies tracked in the study expressed intentions to relocate operations.

“This number is still modest given total assets of the UK banking sector alone is estimated to be almost £8 trillion, but may become larger as we move towards Brexit,” the EY research found.

Last week, JP Morgan told about 200 staff to to move out of London as it prepares for the first few days after the UK's final exit from the EU. Staff will be relocated to Paris, Milan, Frankfurt and Madrid and receive six months of commuting and accommodation support to cover the cost of the move.

On Wednesday, a number of major banks said they were abiding by the government's new restrictions to curb the spread of coronavirus, which includes urging employees in London to work from home. Barclays, Goldman Sachs, Societe Generale and insurance giant Lloyd's of London all ordered UK staff to work from home after previously looking at bringing workers back into the office.

Mizuho Financial Group said on Wednesday that it plans to trim office space in New York and London in anticipation that some staff will keep working from home even when the coronavirus pandemic is over.

Updated: September 23, 2020 06:42 PM

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