Deutsche Bank Plans to Operate in U.K. Via Branch After Brexit

(Bloomberg) -- Deutsche Bank AG reiterated that it’s planning to move assets from London to Frankfurt to avoid any disruption for clients when the U.K. leaves the European Union.

The process is “well underway with the full understanding of U.K. and EU regulators,” according to a Deutsche Bank spokesman. The lender said last year that it would make Frankfurt rather than London the primary booking hub for investment banking clients. It could shift about 300 billion euros ($351 million) from the U.K. balance sheet, people familiar with the matter had said.

Deutsche Bank also plans to continue operating as a branch in the U.K., in line with guidance from the Bank of England, it said. The Financial Times had reported that the bank views the more costly option of making its U.K. business a ring-fenced subsidiary after Brexit as increasingly likely. Setting up a fully-fledged unit could be more expensive than running a branch because local subsidiaries generally require capital to be held within that jurisdiction.

The German lender has traditionally been able to use the cheaper branch strategy because EU rules allow an institution registered in one EU state to do business anywhere in the bloc. That system, known as passporting, will no longer apply automatically in the U.K. after Brexit, although the BOE has indicated it doesn’t intend to stop EU-based banks operating as branches.

Banks across Europe are facing similar headaches as they prepare to re-jig their U.K. operations to avoid losing access to customers and revenue when Brexit takes place next year. Deutsche Bank’s home supervisor, the European Central Bank, has said it wants banks to use U.K. branches to conduct business in the U.K. rather than as a hub for EU activities.

Deutsche Bank said it is confident that there will be no disruption for its clients from the Brexit-related reorganization.

©2018 Bloomberg L.P.