The FINANCIAL — JP Morgan Chase & Co is reportedly set to move $234bn (£184bn) assets from the United Kingdom to Germany as a result of Britain’s exit from the European Union. While the type of assets being moved was not specified, similar transferals usually include cash and financial securities like stocks and bonds. The US banking giant plans to finish the migration of the assets to a Frankfurt-based subsidiary by the end of this year. Also, JPMorgan is set to pay nearly $1 billion to settle with US authorities investigating whether the bank manipulated the metals and Treasury markets.
The shift would make JP Morgan Germany’s sixth largest lender, based on reported assets of the country’s largest banks last year. A JP Morgan spokesperson declined to comment on the reports. The reported shift in asset allocation comes as the threat of a no-deal Brexit looms over international banks. With the post-Brexit transition period set to expire in less than four months, lenders are moving to boost their operations in Europe to ensure they can continue to operate if UK-based firms do not retain passporting rights to operate in the EU. While other banks including UBS, Standard Chartered and Citi have already moved to strengthen their operations in Frankfurt, JP Morgan’s plans would represent the biggest shift any lender has made to Germany’s financial hub, according to City A.M.
In January, the bank had also announced it would significantly expand its Paris hub as part of plans to relocate some services from London after Brexit. The shift sees JPMorgan follow similar moves by other big banks in Britain, as regulators in continental financial hubs such as Frankfurt and Dublin urge banks to book their assets locally. Barclays for example has moved its European headquarters and almost 200 billion euros in assets to Dublin, Reuters reported.
A shift in assets opens a window into how banks are planning for the future after the “Brexit” officially transpires, and they will likely no longer be able to book entire trading operations for the continent out of London. Instead of trading with the U.K.-based subsidiary, clients of the European banks will now trade with the lenders’ local banking entities. The banks using Britain as a gateway to the union must fully execute their plans for serving EU customers before the transition period ends in December. The U.K. withdrew from the European Union’s political institutions on Jan. 31, but remains in a tariff-free transition period until the conclusion of 2020 while negotiators try to work out a future trade relationship, Fox Business wrote.
JPMorgan is set to pay nearly $1 billion to settle with US authorities investigating whether the bank manipulated the metals and Treasury markets. The sum would set a record for spoofing-related settlements and could be announced as soon as this week. The payment would be in line with other market-manipulation sanctions but surpass previous spoofing fines. The payment would resolve investigations by the Justice Department, the Commodity Futures Trading Commission, and the Securities and Exchange Commission, according to the report. The agencies have been looking into whether traders on JPMorgan’s metals-futures and Treasury desks interfered with the respective markets, according to Business Insider.
News of the inquiries broke in September 2019 when three JPMorgan traders were charged by the DOJ for allegedly running an eight-year conspiracy that involved placing thousands of fraudulent orders on precious metals in order to confuse the market and force rival traders to act accordingly. The tactic, known as “spoofing,” can be effective and was made illegal after the 2008 crisis. The three bankers, Michael Nowak, who was once head of JPMorgan’s global precious metals, Gregg Smith and Christopher Jordan, are facing a federal RICO charge. If JPMorgan does end up paying the fine, it would be the largest in history for “spoofing,” as reported by New York Post.
It is also noteworthy that on September 20 International Consortium of Investigative Journalist (ICIJ) posted data. According to ICIJ 193 bank transactions were flagged as potentially suspicious. The data are based on the recently leaked FinCEN Files, which are suspicious activity reports filed by banks and other financial firms with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). Read more.