The past year has been marked by indecisiveness and growing contemplation from global lenders operating in the UK – facing uncertain Brexit prospects, many banks have looked beyond London for a new base of operations. Daiwa Securities Group has become the latest second marquee investment bank to come to a decision this week, opting to set up a subsidiary in Frankfurt.
Daiwa Securities Group is presently the second largest securities brokerage in Japan after Nomura, which incidentally also decided on a move to Frankfurt this week. Nomura had been mulling a move for months and will now begin its own plans to secure regulatory approval in Germany and office space.
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Daiwa’s decision could also kick off a scramble amongst lenders, given the already limited office space in Frankfurt, which has served as the biggest deterrent to date for a widespread relocation. Frankfurt and Dublin had emerged as the two most likely landing spots for banks operating in the UK. In a bid to service EU clients, many had been eyeing a locale within the bloc, given that passporting rights to the UK are not guaranteed.
Ironically, despite UK PM Theresa May’s insistence that this practice would be curtailed, her recent electoral setbacks have cast doubt on the scale of Brexit, which had been showing signs of softening in recent months. Daiwa Securities was in no mood to wait any longer, ultimately favoring the German city over its other rivals, including Amsterdam and Paris, which had emerged as dark-horse candidates for other lenders.
The benefits of Frankfurt are obvious. It is close to the EU’s core markets and boasts a healthy labor pool and robust infrastructure. Moreover, the move to Frankfurt makes logistical sense for Daiwa Securities, given that it can easily transfer its London-based staff to its newly launched investment banking branch.
Per the move, Daiwa Securities will now begin its application for a license to operate in Germany, which would help enable it to continue to service its clients in the EU, regardless of Brexit. With office space already at a premium in Frankfurt, it will be interesting to see if the decision of two large banks to set up shop in the German city stimulates any movement amongst other lenders, many of which remain undecided.