Morgan Stanley picks Frankfurt as post-Brexit hub

Move by US investment bank to ensure it can keep trading across EU could put 200 jobs at risk in City of London

US investment bank Morgan Stanley has chosen Frankfurt as the site of its post-Brexit EU hub in a move that could put 200 jobs in the City of London under threat, reports The Guardian.

The bank will apply for a licence with the local German regulator that will allow it to continue trading across the EU after Britain leaves the EU.

About 200 UK jobs could be relocated, affecting staff across the bank’s operations.

The move is expected to double the workforce at Morgan Stanley’s existing Frankfurt office, which houses 200 staff, though the bank may also increase its presence in its Paris and Dublin offices as part of its post-Brexit strategy.

It comes as City institutions debate the steps they will need to take to continue sales and trading activities across Europe if they lose “passporting rights”, which allow UK-based banks to operate in EU countries without the need for extra regulatory approval.

Morgan Stanley declined to comment, although a source inside the bank privately confirmed the Frankfurt plans.

The source said: “Come 2019, we might not be able to service [EU] business out of London. To do that we need a European hub, a regulated entity with capital and risk management. We need to establish a second main hub to London in Europe.”

This suggests that the movement of the 200 staff, which is not thought to be likely to happen until next year, is merely the first stage of potentially bigger plans for Morgan Stanley’s presence in Frankfurt. Even so, Frankfurt has a long way to go to overtake the London office, which employs 5,000 staff and is expected to remain the investment bank’s European headquarters.

The news comes after Andrew Bailey, the chief executive of the Financial Conduct Authority, said on Tuesday that City firms were getting near to the point where they would have to take steps to move staff and other measures to ensure they could continue to operate seamlessly once the UK left the EU in March 2019.

Firms were not moving their business yet, he said, but they were talking “more in terms of getting there”.

Bailey made his remarks amid expectations that the Wall Street firm Citi will shortly announce that Frankfurt is to become its key hub in the EU. Citi employs 9,000 people in the UK, and its senior management revealed in January it was using 25 criteria to help decide which financial centre to choose for its EU centre.

Standard Chartered, Nomura and Daiwa are among the other financial institutions that have already picked the German city for their new EU base.

Last week, Barclays said it was talking to regulators in Dublin to discuss expansion, while JP Morgan has also been discussing plans with regulators in the Irish capital. HSBC has warned it could move 1,000 staff from London to Paris.

Morgan Stanley’s imminent move of key roles to Frankfurt came as it beat Wall Street’s profit expectations, reporting gains across most of its businesses and, unusually, producing more trading revenue than rival Goldman Sachs.

The sixth-largest US bank by assets reported an 11% rise in second-quarter profit, generating more revenue from giving corporations advice, underwriting securities, trading equities and managing customers’ money.

The one dark spot, bond trading, fell 4%, much less than at Wall Street rivals that reported earnings in recent days. The $1.3bn (£998m) in revenue from that business toppedthe CEO James Gorman’s $1bn quarterly target and beat Goldman’s $1.2bn.

Morgan Stanley shares jumped 3.9% to $46.95 in morning trading.