J.P. Morgan Studied Its Own Brexit -- WSJ
July 19 2016 - 3:02AM
Dow Jones News
By Emily Glazer
J.P. Morgan Chase & Co. Chief Executive James Dimon had his
bank weigh the possibility of its own type of Brexit years before
the U.K. voted to leave the European Union.
The research, done around 2011, concluded that certain European
moves wouldn't make financial sense. This underscores how difficult
and potentially costly any moves may be for banks if they are
forced by Brexit to relocate some of their businesses from the U.K.
to other countries within the EU.
Last week, Mr. Dimon said on a quarterly earnings call he hoped
politicians would be "very sensible" on decisions relating to the
EU and the U.K., such as giving businesses years to adjust to the
new reality. He said the bank will continue to serve clients in
European countries, even if costs increase. The bank is prepared
for "a range of outcomes," he added.
J.P. Morgan and other large banks are examining relocation
strategies in light of Brexit, though most stress the discussions
are at an early stage. J.P. Morgan's analysis includes the pros and
cons of moving several hundred employees from the U.K. to other
European countries, though it doesn't currently envision creating a
new European headquarters to replace London, people familiar with
the matter said.
Back in 2011, Mr. Dimon, head of the largest U.S. bank by
assets, ordered an analysis to see whether it would be worthwhile
for J.P. Morgan to relocate businesses or employees from the U.K.
and other countries to elsewhere in Europe, current and former
employees said.
That was roughly five years before the U.K.'s vote to leave the
EU upended markets.
Mr. Dimon's call for the European analysis came around the time
the U.K. changed tax rules and brought in tougher capital
regulations. This made it more expensive to do business in the
region, these people said.
Mr. Dimon wasn't happy with the moves. During meetings with
then-Prime Minister David Cameron and then-Chancellor George
Osborne, he voiced his frustration. But no major changes resulted,
a person familiar with the matter said.
Mr. Dimon decided to consider his alternatives. He tapped the
bank's corporate strategy team, a small group within J.P. Morgan
that analyzes a variety of potential situations.
In terms of examining whether J.P. Morgan should relocate jobs
or businesses outside of the U.K. or other European countries to
elsewhere in the continent, the corporate strategy team within the
firm's investment bank got to work. It tapped executives,
particularly finance chiefs, to analyze a variety of metrics,
ranging from relocating employees to the cost of booking trades in
various countries, a person familiar with the analysis said.
For some business lines and employees, areas such as Frankfurt
and Luxembourg were analyzed as alternative geographic
possibilities, this person said.
But the economics just didn't line up. The corporate strategy
team recommended to Mr. Dimon and other top executives that there
wasn't enough cost savings to justify a major geographic change for
businesses or employees from the U.K. or other European countries
to elsewhere in Europe, people familiar with the matter said.
Write to Emily Glazer at emily.glazer@wsj.com
(END) Dow Jones Newswires
July 19, 2016 02:47 ET (06:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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