As Goldman Sachs tries to secure access to the European Union market when Britain leaves the bloc, it is considering shifting some of its assets and operations from London to Frankfurt, reported CNBC quoting three people familiar with the matter.
By putting some of its operations under the watch of the euro zone’s main banking supervisor, the U.S. investment bank is examining the step as a way to qualify for supervision by the European Central Bank.
According to one person with knowledge of the matter, it would be able to continue selling its services to clients across the euro zone and wider EU post-Brexit ince it would come under the ECB’s jurisdiction.
However, Goldman had not yet taken any decision on the matter and this is still uncharted legal territory, the sources said.
“Moving under ECB supervision in Frankfurt is one of the options the bank is considering,” one of the people said. Another said Goldman had held talks about such a step with ECB officials in Frankfurt.
Representing a blow to London’s status as a global financial center – and a coup for Frankfurt, a small city that is Germany’s own finance capital, the plans being examined would shift Goldman’s European presence towards the center of the euro zone.
There were “numerous uncertainties” about the outcome of Brexit negotiations, a spokesman for Goldman Sachs said.
“We continue to work through all possible implications of the Brexit vote,” he said. “We have not taken any decisions as to what our eventual response will be.”
An ECB spokesman declined to comment.
The EU’s “passporting” system forms the basis for Goldman’s services including broking and market-making in securities, foreign-exchange trading and corporate finance. While under the supervision of UK authorities, the allows it to sell across the region without setting up shop in each member state.
But banks’ UK operations are expected to lose their passporting rights after Brexit.
According to 2014 data from think-tank Bruegel, with 88 percent of their regional employees based there, currently, U.S. banks concentrate the bulk of their European operations in Britain.
If it increased the assets of its euro zone operations to 30 billion euros ($33 billion), a bank such as Goldman Sachs would typically qualify for ECB supervision.
According to filings for last year, in 2015, Goldman Sachs AG in Germany had assets of 551 million euros. However the value is higher for the bank’s overall assets in other entities in Germany and the rest of the euro zone.
One of the sources said that Goldman is keeping a floor vacant at its high-rise offices in Frankfurt which could accommodate any additional staff.
The tower, where Goldman Sachs has occupied the top floors for more than a decade, had been planned to be returned to its original owner. But the Brexit vote results forced a rethink by the bank.
Banks will lose their passports or automatic right to do business in the EU after British Prime Minister Theresa May’s pledge to deliver a full exit from the European Union, is the worry for bankers in the City of London. Two years of talks to reach this are due to start in March.
(Adapted from CNBC)
Categories: Economy & Finance