As Britain prepares to negotiate its EU departure, a number of banks are likely to decide within two months where to set up new continental bases to make sure they can keep serving clients in the bloc after Brexit.
The European Central Bank said it will host a meeting of banks on May 4 at its offices in Frankfurt. It will spell out in detail what those moving some of their operations out of London must do to apply successfully for a licence.
Talks with financial authorities have been under way for several months but the banks are expected to make up their minds imminently on where to move staff and operations.
“We are in the hot phase. In the next six to eight weeks, there will be a series of decisions,” Felix Hufeld, head of Germany’s Bafin financial regulator, said.
Ireland’s central bank will hold a similar gathering next month to advise groups considering a move to Dublin, which along with Frankfurt, Paris and other centres is competing to offer the banks a second base that remains in the European Union.
A spokeswoman for the Irish central bank added that it had regular contact with the industry concerning “the potential consequences of Brexit”.
Authorities expect potentially dozens of international banking groups, currently operating their eurozone business out of London, to move some operations and staff to the 19-member eurozone.
They are likely to shift several thousand staff out of London, as banks based in Europe’s biggest financial centre will lose automatic “passporting” rights to sell services across the EU when Britain is no longer a member state.
Bankers also say Frankfurt is set to win the most business following a discreet but concerted German campaign to promote the financial centre of Europe’s biggest economy.
We are in the hot phase. In the next six to eight weeks, there will be a series of decisions
German politicians have been reluctant to lobby publicly for big global banks to move to the country. Federal elections will be held in September and some voters remain suspicious of the financial industry after several German banks were forced to seek taxpayer-funded bailouts during the global crisis.
However, they have held a series of meetings with bank executives. Finance minister Wolfgang Schaeuble and politicians from the state of Hesse, home to Frankfurt, have met Wall Street powerbrokers in the US and Germany in recent months, according to several sources familiar with the matter.
As far back as October, Schaeuble met Goldman Sachs CEO Lloyd Blankfein in Berlin and discussed its post-Brexit plans, according to two sources familiar with the matter. Goldman Sachs is considering moving some operations to Frankfurt.
James Gorman, the chief executive of one of the world’s biggest banks, Morgan Stanley, recently visited Frankfurt where he met local regulators. Morgan Stanley intends to move jobs from London to cities such as Frankfurt, people involved in the process have said.
France is still pushing for banks to move to Paris and HSBC has a big presence in the city. But many of its peers are reluctant to move to the city, where rents are high and they would face a special tax on wages in the financial sector.
Last month Prime Minister Theresa May formally declared Britain’s intention to leave the EU, opening a two-year period for both side to negotiate the divorce. Talks are expected to begin in June, although May’s surprise calling of an election for June 8 has added to the uncertainty.
Given the tight Brexit timetable, bankers are keen to get cracking.
The ECB, which takes the final decision on granting a bank licence, has said they should allow at least six months to get one.
However, Barclays chief executive Jes Staley said this week that obtaining a licence to trade on the continent and changing financial contracts to another jurisdiction takes a year to 18 months.