MUFG eyes Amsterdam as post-Brexit EU base

FT, July 31, 2017

By Martin Arnold

Mitsubishi UFJ Financial Group, Japan’s biggest bank, plans to choose Amsterdam as the new EU base for its investment banking operations to cope with the disruption of Brexit, according to two people briefed on the situation.

The decision highlights the fierce competition between European capitals, which are vying to snap up London’s financial services companies in the wake of Brexit. MUFG’s move also underlines how many of the world’s biggest banks have decided they cannot afford to wait for political uncertainty surrounding the outcome of Brexit negotiations to clear before implementing their plans for a potential clean break between the UK and EU.

Faced with the likely loss of its passporting rights to sell investment banking services from London to the rest of Europe, MUFG is set to open a second arm of its European securities operation in Amsterdam. 

Such a shift could involve hundreds of jobs moving to Amsterdam out of the 2,100 people MUFG employs in London. But one person briefed on the plan said it would initially affect fewer than 100 jobs.

The Japanese group would be the first global lender to pick the Dutch city as its new EU hub to cope with the disruption of Brexit. 

It would mark a break with MUFG’s main Japanese rivals, including Nomura, Daiwa and Sumitomo Mitsui Financial, which have all said they plan to make Frankfurt the main base of their investment banks for EU clients.

The pace of announcements about banks’ Brexit plans has picked up in recent weeks, partly due to pressure from the Bank of England for them to submit their plans for coping with the “worst-case scenario” of a hard Brexit, severing access to EU clients. 

Amsterdam has struggled to attract many of the big name financial institutions shifting operations out of London because of Brexit. Citigroup, Morgan Stanley and Standard Chartered have chosen Frankfurt, HSBC has opted for Paris and Bank of America and Barclays have picked Dublin. 

One factor going against the Dutch city is the country’s decision to impose a stricter cap on bonuses than required by EU law. Dutch banks are limited to paying bonuses of no more than 20 per cent of fixed pay, while other EU banks can pay bonuses of up to double their fixed pay with the consent of investors. 

Dutch ministers have promised that foreign banks moving operations to the Netherlands could avoid the 20 per cent cap by using an exception in the law for groups that employ at least three-quarters of their staff outside the country.

Amsterdam benefits from strong transport links, which will be improved when Eurostar extends its high-speed train service to the Dutch city next year. 

MUFG has already made Amsterdam the main EU headquarters for its corporate and retail banking operations.

The Japanese lender, which has about 700 staff spread across 22 offices in 14 European countries outside the UK, is still in discussions with its various regulators about its Brexit plans and no decision has been made, according to a person briefed on the matter.

While Amsterdam is the clear favourite, the bank has not completely closed off other potential locations, the person said.

MUFG declined to comment.