Brexit: Bank of America makes Paris its “trading floor” for Europe

Sent 5 Dec. 2022 at 16:39

Bank of America makes Paris its new official trading venue for Europe. Several hundred traders and salespeople from the US bank’s trading room have taken up residence in the 11,000 square meters of PTT’s former and impressive late 1920s head office, rue de La Boétie, in recent months.

Another step has just been taken. “Bank of America Securities Europe has just been approved as a credit institution, supervised by the European Central Bank (ECB), welcomes Vanessa Holtz, the new CEO of BofA Securities Europe SA, who leads the company’s market activities for Europe, overseeing its activities in France. Paris has become the real center of Bank of America’s market activities for the EU. »

Bank of America received its new license from the ECB for credit and investment companies on November 8, and supervision by the central bank will come into effect on Thursday, December 8.

This arbitrage is in line with JP Morgan’s for its Paris trading room. But it differs from its main competitors, which have hosted the European supervisory institution for these activities in Frankfurt, in other words, near the ECB, rather than in the French capital.

From 80 financiers on avenue Kleber on the eve of the Brexit vote in June 2016, there are now 600 Bank of America traders, salespeople and bankers operating in Paris.

“We strengthened our teams in Paris from the start beyond the necessary minimum by involving negotiators and research teams with sellers, despite a difficult context associated with the social demands of yellow vests, and then the confinement caused by Covid, emphasizes the manager. I am struck by their resilience.”

Improved ECB requirements

The American bank provides the funds. It increased BofA Securities Europe SA’s risk-weighted assets by more than 8 billion in the first half of 2022 to reach 38.68 billion, according to its latest report, while strengthening its capital by 900 million euros in the period (at 7.7 billion Euro). ).

An investment that is meant to be long-term, while Wall Street firms’ commitment is often considered uncertain outside their borders. “We intend to stay in Paris and continue to implement our European strategy from France,” said Vanessa Holtz, citing the talent pool and the sophistication of supervisors as important factors in the firm’s decisions.

Other foreign banks forced to move their post-Brexit European operations to the continent are likely to have to step up.

In May, the ECB said it was concerned about the risk management of the majority of the 264 trading rooms of the major US and UK banks in the eurozone. No less than 70% of their 264 trading rooms in Europe do not directly manage their balance sheet and their market exposure. These are monitored from London or elsewhere by the parent company or other group entities in the form of mirror transactions (“back-to-back” in the jargon). And the ECB estimates that almost half (46%) of risk-weighted assets in these trading rooms, concentrated in 56 of them, “require a targeted decision by the supervisor”.

This will be an important step for major Anglo-Saxon investment banks in Europe. The decisions announced at the end of the first quarter for these 56 trading rooms will be legally binding. As a result, increased risk management capacity (operational and governance) of the European legal entity hosting the market activities will potentially be required.

The first American bank, JP Morgan, has already been planning for several months to strengthen its back-office teams on the European continent. Up to a thousand additional employees can be assigned to these activities.

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