Citi will become the latest Wall Street giant to unveil plans to cope with the UK’s departure from the European Union this week when it names Frankfurt as the location for a major new trading operation.
Sky News has learnt that Citi executives have finalised plans to establish a second EU-based broker-dealer, which will handle many of the market trading activities currently undertaken in London.
The US bank has decided to name Frankfurt as the location for the new broker-dealer after also evaluating Paris as an alternative, according to insiders.
Citi’s decision reflects the issue confronting all international banks which rely on the EU’s passporting regime to trade seamlessly across national borders.
The likes of Barclays, JP Morgan, HSBC and UBS have talked in recent weeks about the acceleration of their contingency planning, even as Philip Hammond, the Chancellor, stressed his determination to secure a transitional period enabling companies to contend with the impact of Brexit.
David Davis, the Brexit Secretary, led a new round of talks with EU officials on Monday, although the post-election period has seen growing concern in the UK business community about the Government’s ability to negotiate a good deal.
Jim Cowles, the chief executive of Citi’s operations in Europe, the Middle East and Africa, told a conference earlier this year that it would make a decision about the bank’s Brexit plans within months.
“Our issue is with our broker dealer, which is located in the UK and will lose, presumably, passporting rights,” he said.
Citi, which was among a quartet of Wall Street banks which donated money to the campaign to keep the UK in the EU, warned staff shortly before last year’s referendum that a vote to leave would have implications for some of its 9,000-strong UK workforce.
“To continue to serve our clients and maintain efficient access to those markets currently enabled through the EU passporting regime, we would likely need to rebalance our operations across the EU,” James Bardrick, Citi’s UK chief country officer, said at the time.
Initially, Citi’s decision about its new EU-based broker-dealer will not affect more than approximately 150 UK-based jobs, an insider said.
However, they added that the bank would also update UK-based employees this week on plans to bulk up its other EU-based operations as Brexit looms, with Dublin likely to be the biggest beneficiary of such moves.
A number “in the low hundreds” would be affected by other Brexit-related re-allocations of staff unrelated to the broker-dealer operation, an insider said.
Citi already employs about 2,500 people in Dublin.
Citi’s announcement is set to come just days after the Prudential Regulation Authority, the UK banking regulator, imposed a deadline for international banks to submit details of their Brexit contingency plans.
If Citi does plump for Frankfurt, it would be another shot in the arm for Germany’s financial capital, with Goldman Sachs, Morgan Stanley and the Japanese firms Daiwa Securities and Nomura among the other firms to outline plans to establish or grow operations there.
Estimates of the number of financial services jobs that will be lost to the UK because of Brexit vary widely, but when added to related professional services jobs, it could be in the tens of thousands, according to some forecasts.
“We believe the UK’s position as a global leader in many areas of financial services is in no small part aided by efficient and effective access to the EU’s single market, the largest single market in the world, with 500 million citizens as potential customers and employees,” Mr Bardrick said last year.
A Citi spokeswoman declined to comment on Monday.