For decades London was the main nexus of European finance, melding continental money with transatlantic ideas of what to do with it. But two years after Brexit became a reality, there’s been a clear shift across the Channel.
The spoils are being shared by European Union cities, creating a more fragmented landscape. It’s one where banking of various stripes gets done in Paris, shares trade in the Netherlands, and corporate lawyers and accountants pore over the details in Frankfurt. Dublin, Milan, Madrid and Warsaw are playing important supporting roles.
But if any city can make claim to being the bloc’s new pre-eminent hub, it’s Paris.
The city’s allure may have been tarnished this year by protests against President Emmanuel Macron’s plans to raise the retirement age, which led to nationwide strikes and images of burning garbage in the streets. But the numbers working at the offices of Wall Street titans point to a new European banking reality, one that won’t easily shift back after a mammoth relocation of money and brains.
JPMorgan Chase & Co has about 550 markets staff including sales people and traders in the city now, a 22-fold increase on 2019. Bank of America Corp’s headcount — at 600 — is six times higher than before the 2016 Brexit vote. Citigroup Inc. is building a new trading floor around the corner from the Avenue des Champs-Élysées.
The global markets team at Goldman Sachs Group Inc. has more than doubled in the last two years, and the bank sees those numbers increasing further.
“Paris is now our largest trading hub in the EU,” Marc d’Andlau, one of Goldman’s co-heads in France, said in an interview. “Back in the day, if you didn’t sit in New York, London or Hong Kong you could feel remote. That’s not the case anymore.”
London is still vastly bigger in terms of staff numbers, assets and volumes of business, but the UK’s departure from the EU is eroding its status. The city has effectively given up its mantle as the default location for companies to tap global pools of capital via stock and bond markets.
And even amid the trouble on the Parisian boulevards, France’s top officials are promoting the city’s Brexit wins and predicting the trend of recent years will continue.
“Contrary to other cities, which have attracted one or two kinds of financial services, Paris is the only one to have benefited from relocations on all segments of the financial industry,” Francois Villeroy de Galhau, France’s central bank governor, told a group of bankers in New York this month. “More important still, these moves were not one-off events: the momentum has lastingly shifted from London to continental Europe. We observe a steady shift, which shows no sign of losing steam.”
Citigroup is building a new trading floor as the bank prepares to nearly double its staff in the French capital. Image: Benjamin Girette/Bloomberg
Figures from the European Banking Authority published in January showed the number of investment bankers and traders in France earning more than €1 million ($1.1 million) was up almost 80% since 2017. While the big early wave of relocations is largely over, many executives who spoke to Bloomberg said they expect headcount to keep growing from local hiring.
Goldman Sachs partner Lear Janiv, a 16-year veteran of the firm, has moved from London to Paris to become head of FICC and equities trading at the bank’s main EU unit. And it’s not just banks; hedge fund Millennium Management has roughly doubled its employees in Paris in the past year and plans to keep expanding.
The influx of wealthy traders and dealmakers is already helping to push up demand for things like bilingual private schools and prime apartments with Instagrammable views of the Parisian skyline. Banks offer relocation advisors, language lessons, and working conditions fit for an A-grade international city rich in culture and opportunity.
At Goldman’s offices, government bond traders look out onto the Arc de Triomphe. Bank of America operates out of a five-storey, Art Deco converted postal headquarters. Nearby, the streets are dotted with stores selling Louis XVI-era rosewood furniture and drawings by Picasso.
A morning commuter at Place Vendome in Paris, the EU headquarters of JPMorgan Chase & Co. are on the square in the 1st arrondissement. Photographer: Benjamin Girette/Bloomberg
“We wanted to make sure that our employees settle and succeed in Paris,” said Vanessa Holtz, who runs Bank of America’s operations in France covering Europe. “To make them stay and establish the European hub as their home is a very important process, and Paris has it all.”
BofA’s French investment banking business, led by Jerome Morisseau and Emmanuel Regniez, has also doubled its headcount since 2021.
Beyond the immediate rush to get the new financial plumbing and manpower installed, the work of recent years will have ramifications far into the future.
Stephane Boujnah, chief executive of stock-exchange operator Euronext NV, recalls the foundational effect that London used to play in the lives of financial professionals. Like Villeroy, he says a long-term change has begun.
“I was part of the generations of people in the finance industry for whom London was the normal place to be,” he said. “But in 20 years there won’t be as many. This is creating a slow-moving river of small decisions that’s going to change things.”
Phase One
Since early 2018, nine of the biggest international banks have increased the assets booked at their eurozone entities more than sixfold to almost €1.7 trillion, according to data from the European Central Bank. Company filings suggest most went to Frankfurt, which has become the center for risk management in the EU.
The relocation effort has been a huge task. The ECB says no authority ever had to assume oversight of so many foreign investment banks over such a short period.
That movement of money is being matched, to an extent, by the movement of people. Consultancy EY says that about 7,000 staff switched from London in the initial phase. Going forward, financial hubs in the region will be built out through local hiring. Last year, Goldman took on its first cohort of interns in Paris.
“The majority of people who we asked didn’t want to move at first,” said Matthieu Wiltz, co-head of EMEA Sales at JPMorgan. “Now that we are 18 months or 2 years down the road, the feedback from the team is very positive. It’s better than anticipated and people seem to enjoy living in Paris.”
For those that formed the bridgehead in Paris, the talk has been of the rudiments of everyday life — apartments, schools, downtime — albeit at a level that high earners are used to.
Prices for apartments in the Parisian districts close to the offices of some Wall Street banks jumped about 33% between 2017 and 2022. Values for properties over 200 square meters (2,153 square feet) across the city have increased in the last two years, while smaller ones have fallen, according to data from the Paris Chamber of Notaries.
Nicolas Pettex-Muffat, General Manager of Paris-based luxury real estate broker Daniel Feau Conseil Immobilier, says the rental market is “extremely tense.”
“It’s hard to find a place for everyone as bankers all want the same thing: a condo with an outside space and a view over Paris,” he says.
Paris’s post-Brexit leadership is partly due to the fact that it’s the European location most like London, in the sense that it’s a true global city at the center of a populous country. Business, politics and culture are all in one place — which can’t exactly be said of Frankfurt, Milan or even Amsterdam.
But those places are also getting an influx of wealthy financial professionals. Take Milan, for example, where Italian lenders like UniCredit SpA and Intesa Sanpaolo SpA have moved people from London, and US banks have built out their presence. Goldman Sachs has shifted some of its euro swaps trading desk to the city.
Like Paris, luxury property prices are booming and international schools are struggling to meet demand.
Ingrid Hallberg, a luxury real-estate broker in Milan who relies on the word-of-mouth of those with clout, says she’s witnessed fights between prospective buyers of large luxury homes. Those arriving with a spouse, children and perhaps one or two domestic staff are finding it tough to land a property with the requisite number of bedrooms.
The entrance to the Goldman offices in Milan, where some of the banks euro swaps trading desk is shifting to from London. Image: Francesca Volpi/Bloomberg
One attraction of Milan is a special Italian tax policy for the super rich relocating to Italy, including one that allows them to pay a €100 000 flat rate on income made abroad, or alternatively not paying taxes on up to 70% of their Italian income. Paris has also benefited from a special tax regime in France for incoming workers.
Some of the relocation effort of recent years was driven by the ECB’s requirement that European risks should be managed in the euro area instead of London. And there’s been an unintended side effect.
Those Wall Street giants are now not just fly-in, fly-out visitors hankering to be back in London. They’re embedded in the German, French and Italian economies to a greater extent than they’ve perhaps ever been, and are taking on local incumbents for a share of domestic business.
US investment banks have steadily expanded their advisory and underwriting market share since 2016, and they’ve dominated the top five positions in Western European M&A rankings for the past two years as well as initial public offerings. Porsche SE’s IPO last year and Deutsche Bahn AG’s sale of DB Schenker are just the latest examples where US institutions took lead roles in major deals.
Frankfurt has become the center for risk management in the EU. Image: Alex Kraus/Bloomberg
In France, Goldman Sachs has extended a small business support program previously only available in the UK and US, and makes no secret of its intentions to challenge European banks in their own backyard.
“We are proud of our ambitions in France and step by step we are taking market share and increasing revenue,” said Goldman’s d’Andlau.
This business opportunity helps explain why big international lenders are also embracing the shift on their own initiative. Brexit may have done more to spur competition in European banking than any Brussels directive, especially as the bloc’s efforts to complete a “banking union” remain deadlocked.
“I used to work for these banks myself and you would come in the morning from London and fly back,” said Andreas Dombret, a former Bundesbank board member. “But if the decisions are made in Frankfurt or Paris and the loans are booked there and the compliance and the supervisors are looking at it, you have a very different set-up. Those American banks that looked like far away banks have come a lot closer.”
London remains the big beast in European finance for now, with headcount vastly outnumbering the rest of Europe. And it’s hard to shift staff whose lives and families are embedded in the UK. Jason Kennedy, a recruiter, says that most hedge fund staff who are moving back are French. “It’s exceptionally difficult to find candidates in Paris,” he says.
Still, London’s position has diminished. As businesses grapple with life after Brexit, even homegrown UK companies are putting profits over patriotism.
A decision by chip designer Arm Ltd. to list in New York instead of London is particularly telling. It was in stocks trading that liberalizing reforms helped unleash the City’s original “Big Bang” four decades ago. Amsterdam has traded more shares than London in every month since July 2021.
The government in March appointed a senior lawyer to lead a review into making the UK a more attractive destination for stock exchange listings. When he was chancellor, Prime Minister Rishi Sunak said that he’d make the City of London “the world’s most advanced and exciting financial services hub.” But Brexit keeps chipping away at such grand ambitions.
Even with at least one more major protest planned in France against Macron’s retirement law, on May 1, the buzz is around Paris and the associated new hubs that make up Europe’s post-Brexit banking landscape.
“There is a risk of a slow puncture effect on City jobs, activities and tax payments,” said Tony Travers, a professor at the London School of Economics. “The City is still enormously important to London and UK in terms of wealth, tax revenue and the people it brought to London after the Big Bang to 2008. Whether something could replace it or become more important, we will discover.”
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