Goldman and StanChart Hike Brexit Job Plans for Frankfurt

(Bloomberg) -- Goldman Sachs Group Inc. and Standard Chartered Plc have recently expanded the number of staff moving to Frankfurt by April as financial services firms accelerate their Brexit planning, according to people familiar with the matter.

The decision came after the European Central Bank toughened its demands for how many people and IT resources it expects banks to have in the euro area on the day the U.K. leaves the European Union -- called Day 1 -- among regulators, the people said, asking not to be identified as discussions are private.

The number of additional employees Standard Chartered will have in Frankfurt on Day 1 was initially increased by a handful, according to a person familiar with the matter. But, the emerging markets lender now expects to more than double staff to in excess of 200 in a few years, the people said. It’s not clear if other banks have made similar changes to their Brexit planning to satisfy the ECB, said one of the people.

Several securities firms in the EU that currently conduct most of their business from London will need to move their EU-focused trades into the economic bloc when the U.K. drops out, and obtain new or additional banking licenses. This requires them to set up the necessary IT systems in the EU and move employees such as risk managers to satisfy regulatory demands.

Some banks had previously assumed that regulators would allow them to continue to book EU trades entirely in the U.K. -- a practice known as back-to-back trade -- at least for some time after Brexit occurs. They had presented the plans for the immediate aftermath of Brexit, based on that assumption, the people said.

However, the ECB in late summer published guidance that it wants to see at least some booking taking place in the euro area as soon as Brexit occurs in late March. Banks must then decrease the level of back-to-back trades over the following years in a way that must be deemed as “credible” by the ECB, although it won’t need to hit zero, one person said. That ECB guidance took some banks by surprise and forced them to increase their Day 1 plans, the people said.

The moves come as Britain’s financial-services industry suffers a drop in foreign investment while some of its European counterparts enjoy big gains, according to a study in the summer that shows the starkest indication yet of Brexit’s impact on the sector. Investment from abroad in Britain’s financial-services firms fell 26 percent last year, EY said. During the same period, Germany experienced a 64 percent increase.

Goldman has recently started moving people to Frankfurt, one person said. They will be assigned desks in the bank’s existing office space in a high-rise building called Messeturm before the company moves into its new, more centrally-located office at a later point.

Representatives for Goldman, Standard Chartered, and the ECB declined to comment.

Here’s a table of foreign banks’ subsidiaries that have recently obtained new banking licenses from the German regulator Bafin.

BankEntity nameLicense Date
Morgan StanleyMorgan Stanley 
Europe SE
securities trading licenseMay 24
NomuraNomura Financial Products Europe GmbHsecurities trading licenseMay 25
CitiCitigroup Global
Markets Europe AG
credit business
license
August 22
DaiwaDaiwa Capital Markets Deutschland GmbHsecurities trading licenseAugust 30

Source: Bafin website

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