case for moving them to DB’s home city, Frankfurt. The British
government has been moderately silent about the deal. Some
politicians nevertheless express worry that the merged compa-
ny’s headquarters might relocate to Germany, taking euro-
denominated clearing with them. On July 3rd Sumitomo Mitsui
Financial Group Inc. (SMFG), Japan's second main lender by
market value, broadcasted that it would establish its European
banking subsidiary in Frankfurt. The move will avoid any dis-
turbance to its services should the UK lose access to the EU's
single market. SMFG will additionally incorporate its European
securities subsidiary, SMBC Nikko Capital Markets, in Frankfurt.
The banking group shadows its national competitors Nomura
Holdings Inc. and Daiwa Securities Group Inc. in shifting its
European base to Frankfurt. Frankfurt Main Finance (FMF), an
industry-lobbying group for the German city, confirmed that
SMFG would launch two subsidiaries in the city. Last week, the
FMF said that around 20 global banks were considering the de-
velopment of operations or establishment of subsidiaries in
Frankfurt.
As the graph shows, London is no longer the main city in Eu-
rope that relies on the financial sector as the highest proportion
of its GDP, with Frankfurt being higher from before 2002. This
provides further reason for Frankfurt to be the new financial
sector of Europe after Brexit.
However, as the graph’s general trend is that the proportion is
rising in London since 2002, whilst it is falling in Frankfurt.
This may be due to the popularity of London being the world’s
financial Capital. Although, this percentage has been falling
since 2011 in London, suggesting that in the UK the financial
sector is becoming less popular recently. This is likely to fall
even further due to Brexit being on the horizon.
To conclude, the UK is very likely to suffer due to leaving the
EU, and if there is a no-trade deal with the European countries
by March 2019, it is very likely that the world’s centre for fi-
nance may move from London to another city, most notably
Frankfurt.
5
Percentage of income from the Financial Sector for various European Cities
