July 20, 2017 / 1:02 PM / a year ago

Citi plans EU broker-dealer in Frankfurt after Brexit

LONDON, July 19 (IFR) - US bank Citigroup said it will set up a broker-dealer in Frankfurt for its European Union operations when Britain leaves the European Union, joining other Wall Street rivals choosing to move staff to the German financial centre.

Citigroup said about 150 new roles are likely to be located in the EU as a result of changes from Brexit. It said they could be located in Amsterdam, Dublin, Luxembourg, Madrid and Paris, as well as Frankfurt.

“We plan to convert an existing German subsidiary into an investment firm (broker-dealer). Frankfurt is our first choice for headquartering our EU broker-dealer based on the existing infrastructure, and the people and expertise we already have on the ground,” Jim Cowles, Citi’s head of Europe, Middle East and Africa, said in a memo to staff.

“It is not yet possible to assess the outcome or timing of the Brexit negotiations, but in certain circumstances we may need to create approximately 150 new roles located in the EU.

“In all cases, London will remain both our EMEA headquarters and an important global hub for Citi,” Cowles said.

Brexit is due to occur by March 2019, and banks are making plans for how it could affect their London operations. Most significantly, banks could lose passporting rights, whereby they can book all their EU trading and activity in London. That means they need a regulated subsidiary in an EU country to provide access.

More than half of Citi’s staff in EMEA are located outside Britain and in January 2016 it expanded its Dublin-based European bank, Citibank Europe. That will continue to be the vehicle for its EU banking operations, the memo said.

But Cowles said “certain adjustments” may be needed due to Brexit, because its current broker-dealer is in London.

The memo said private banking, treasury and trade solutions, corporate and investment banking, and capital markets could all be affected by the fallout from Brexit.

Other major banks including Deutsche Bank, JP Morgan, HSBC and BNP Paribas, are considering shifting some jobs to other cities from London. Frankfurt is proving the most popular alternative destination, followed by Dublin and Paris.

Banks are calling for a transitional arrangements to give them longer to adapt to any changes, but the terms of Brexit are not expected to be known for many months. (Reporting by Steve Slater)

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