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City warns of Brexit exodus as Citigroup shifts hub to Frankfurt

The City of London's regulator has said major City firms will start executing contingency plans at the end of the year if there is no agreement about the UK's transition for exit from the EU. Citigroup is off already.

Financial Conduct Authority (FCA) chief executive Andrew Bailey said City firms are nearing the point they will have to take steps to move staff to ensure they can operate seamlessly once the UK leaves the EU in March 2019, as reported in the UK media.

"By the end of this year, their plans tell them that in order to have things in place, they've got to implement them,” said Bailey.

"Without a transition agreement, they will be having to do so without knowing the outcome of the negotiations. Firms were not moving their business yet," he said, but they were talking "more in terms of getting there."

The Bank of England called on hundreds of City firms to submit their Brexit plans by 14 July.

Watch video 01:51

Tough Brexit talks underway in Brussels

Citigroup makes the move

The bank reportedly plans to extend its broker-dealer in the southern German city and will create 150 to 250 new jobs there, either by moving existing employees or hiring locally.

Citigroup - which employs 9,000 people in the UK - already has about 350 employees in Frankfurt and is seen moving some of its trading activities now done in London, which UK will remain the headquarters for Europe, the Middle East and Africa.

Citigroup has been considering the move for several months and looked at locations in Ireland, Spain, Italy, Germany, France and the Netherlands, Jim Cowles, the bank's top executive for the region, said at a Dublin conference in January.

Senior management said then they had been using 25 criteria to help them decide which financial centre to chose for its EU center.

If it loses the key "passporting rights” it currently uses to conduct business across the EU. These mean that banks can operate out of London in other members of the EU without the need for extra regulatory approval.

BaFin, the German regulator, is widely seen as the only regulator outside of London capable of handling the bank's complicated derivatives business, about moving some of its London-based equity and interest-rate derivatives traders to Frankfurt. 

Frankfurt is a natural pick for many international companies with Deutsche Bank, the ECB and BaFin already in situ.

Exodus

Barclays said recently it is talking to regulators in Dublin to discuss expansion, while JP Morgan has also been discussing plans with regulators in the Irish capital.

Standard Chartered, Nomura, Sumitomo Mitsui and Daiwa Securities picked Frankfurt as their EU hub in recent weeks. Deutsche Bank is preparing to move large parts of the trading and investment-banking assets it currently books in London to its hometown of Frankfurt.

HSBC has said it could move 1,000 staff from London to Paris.

Watch video 01:42

Citigroup heads to Frankfurt

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