Despite being passed over for Frankfurt and Dublin by most other lenders, lenders may be finally coming around to Amsterdam as a new EU landing hub post-Brexit. The Royal Bank of Scotland (RBS) has honed in on the Dutch capital for its new base of operations in the bloc with Brexit talks still in discussion.
RBS revealed its Brexit contingency plans in tandem with an optimistic earnings report that saw its income jump in Q2 2017. The bank saw a Q2 profit of £939.0 million, which helped erase a £2.0 billion loss just one year ago.
The selection of Amsterdam as its new headquarters within the EU differentiates RBS from other lenders, as nearly all of them have opted for Frankfurt and Dublin. RBS joins Japanese lender MUFG as the only major lenders to choose Amsterdam thus far.
Shift towards Amsterdam?
The decision by RBS comes after many other lenders in the UK disclosed their plans as well. The influx of decision making in July was attributed to the Bank of England’s previously announced deadline for UK-based banks to provide the regulator with detailed plans about their Brexit strategies.
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To date, Amsterdam has not succeeded in securing a groundswell of prospective banks looking beyond the UK’s shores for their future plans. This could be due in part to the Netherlands towing a hard line with its bonus limits for banks. In particular, Dutch banks face limits to bonuses, which can be no more than 20 per cent of fixed pay, as opposed to other EU banks that pay bonuses of up to double the fixed pay.
Still, Dutch authorities have hinted at rolling back the 20 percent cap, though only if banks employ at least 75 percent of their staff outside the Netherlands. Frankfurt has also loosened its own regulations somewhat – Frankfurt recently lifted labor restrictions for foreign lenders in the city. These laws dealt with retention and other processes, designed to serve as a carrot for banks that were undecided
As opposed to a wholesale move, RBS instead would be looking to relocate its NatWest Markets operations, which handles its core investment banking business. Such a decision could help mitigate any disruption following the loss of EU passporting rights – which for months have been shrouded in uncertainty by UK authorities.
Consequently, NatWest Markets is moving forward with a European headquarters in Amsterdam and already possesses a banking license courtesy of a prior acquisition from ABN Amro. The hub is estimated to be employing roughly 150 personnel, which may not even necessitate the move of most staff out of the UK, according to a Guardian report.
Earlier this week, fixed income venue Tradeweb also selected Amsterdam, joining the short list of firms looking to the Dutch capital. Moving forward, it remains unclear if other banks’ strategies have effectively discouraged a move to Frankfurt or Dublin. In the case of the former, office space has already been drying up, which could be a factor in any potential moves.