Deutsche Bank to move assets from London to Frankfurt after Brexit

Deutsche Bank (DBKGn.DE) said on Monday it would move assets from London to Frankfurt after Britain’s planned exit from the European Union next year, in line with demands from British and EU regulators.

Deutsche Bank said in a statement it would make Frankfurt rather than London the primary booking hub for its investment banking clients, as per an announcement made last year, Reuters reports.

“By definition this involves moving assets from London to Frankfurt, a process which is already underway with the full understanding of UK and EU regulators,” it said, declining to specify the volume of asset shifts.

A source familiar with the matter said the European Central Bank, as Europe’s main financial supervisor, was putting pressure on banks to shift investment banking activities from London to the continent.

The ECB thereby wants to prevent investment banks setting up empty shells on the continent while still supplying their services from London, the source added.

Regulators are demanding that capital, risk management, governance structures are set up on the continent to support investment banking activities, the person said.

With passporting for financial services off the table Deutsche Bank illustrates what to expect from Brexit, analysts from think-tank Eurointelligence said.

While the least disruptive possibility would have been that only new business would move to the continent, a disruptive option is to actually shift existing portfolios.

“This is not only a major cross-border financial flow in itself but also a huge logistical and legal undertaking for the banks involved, and their clients. Contracts need to be modified, one by one,” Eurointelligence said.

The ECB declined to comment.

According to a report by the Financial Times, Deutsche Bank could over time move about three quarters of its estimated 600 billion euros ($700 billion) in assets from London to Frankfurt.