Frankfurt or bust? Wall Street bankers in London ponder life post-Brexit

By Olivia Oran and Anjuli Davies

NEW YORK/LONDON (Reuters) - Big Wall Street banks are scrambling to figure out what to do with their assets, workers and financial licenses abroad in light of the British vote to exit the European Union (EU).

Bank executives have been making contingency plans for months, but many were still surprised by the outcome of the vote. And even with those plans, huge uncertainties remain about when Britain will formally exit the EU, and what cities could replace it as a financial hub across the Atlantic for trading, lending and dealmaking in Europe.

"The EU is going to change," said one London-based banker. "It can't ever remain as it was."

 

Among the questions being asked in C-suites across Wall Street: What's the best European city to house a broker-dealer, if not London? Does Frankfurt have the capacity to house tens of thousands of bankers and their families? Will language be an issue in cities where English is not the primary tongue? Will American bankers abroad be able to find schools for their kids?

Frankfurt, Paris, Amsterdam and Dublin are all in contention for relocation.

Even with all that uncertainty - and a timetable of at least two years for Britain to formally exit the EU - U.S. banks appeared to be moving quickly to respond to the Brexit decision.

Morgan Stanley on Friday denied a report from Britain's state broadcaster, the BBC, that it had started the process of relocating 2,000 investment banking staff from London to either Dublin or Frankfurt. The bank's president, Colm Kelleher, told Bloomberg on Tuesday Brexit could prompt it to move its local headquarters to Dublin or Frankfurt from London.

JPMorgan Chase & Co is considering changes to its legal entity structure in Europe, as well as moving some of its 16,000 U.K.-based employees, according to a staff memo signed by CEO Jamie Dimon and other senior executives.

Goldman Sachs Group Inc has been planning for the possibility of a Brexit vote for "many months," CEO Lloyd Blankfein said in a memo. The bank has been building a new European headquarters in London, and is now considering what to do with all the space, a source familiar with the matter said.

Meanwhile, on trading floors, a panicked atmosphere was palpable as financial markets reacted wildly to the news. [nL8N19G53E]

The British pound hit a low not seen for more than 30 years and world stocks saw more than $2 trillion wiped off their value. Shares of big U.S. banks fell sharply as markets opened in New York, with Citigroup down more than 7 percent. [nL4N19G5DQ]

Earlier in the day, senior Wall Street bankers were trying to calm nerves in London.

Bank of America Corp's president of Europe, the Middle East and Africa, Alex Wilmot-Sitwell, sent a memo to staff urging them to "avoid distraction" and remain focused on clients.

Goldman's co-head of investment banking Richard Gnodde was walking the trading floor at 6 a.m., talking to staff and trying to reassure them. Through the morning, other senior bankers were giving similar morale talks, telling employees that Goldman would help them in any geographical transition.

Edward Chan, a partner at the law firm Linklaters, noted that these types of reorganizations are complicated and often take 4-5 years, even though the Brexit timetable only extends 2 years.

"Where exactly do they move to? There's no clear answer on that," said Chan. "You might end up having a more fragmented financial industry in Europe."

(Additional reporting by Sinead Cruise in London and Dan Freed and David Henry in New York; Writing by Lauren Tara LaCapra; Editing by Carmel Crimmins and Nick Zieminski)