Deutsche books billions of euros of non-European business through its London broker dealer, which is the single biggest EU bank branch operating in the UK.

 

The situation is permitted because Deutsche can “passport” into the UK market under the EU’s single market. But the passport — which is also relied upon by the multinational banks that use London as a base to sell into Europe — is widely thought likely to become a casualty of the UK’s Brexit negotiations.

 

Analysts at the Boston Consulting Group had warned that German banks — mainly Deutsche and Commerzbank — might have to put an extra €10bn of capital into their UK operations if they were forced to move to a subsidiary structure after Brexit.

 

Executives at Deutsche have begun drawing up plans to move its “rest of world” business to a Frankfurt booking centre, a person familiar with the situation said, confirming news first reported by Bloomberg. The parallel structure could be set up in advance of a final deal on Brexit and then activated depending on what that deal was, he said.

 

In one scenario, if the Bank of England required Deutsche to capitalise its UK entity, then the “rest of world” business could be moved to Frankfurt. That would reduce the size of the UK entity, thereby reducing the amount of capital it would need. [...]

 

Full analysis on Financial Times (subscription required)