Japan's financial institutions weigh options after "Brexit" vote

Japanese banking and brokerage companies will likely have to rethink their business strategies for European operations following Britain's departure from the EU as they operate from London, Europe’s financial capital.

Many set up their bases for European operations in the City on the basis of the “single passport” system that allows financial services operators legally founded in an EU member nation to establish or provide their services in the other member countries without further authorization requirements.

“It would be an option to move our base (out of London) before the outcome of negotiations between Britain and the EU over the exit is made formal, especially if those talks are dragged out,” said a senior official at Sumitomo Mitsui Banking Corp., one of Japan’s three megabanks.

SMBC's arm in London oversees its entire operation in the EU. Based on the license it obtained in Britain, the bank operates six branches in the EU.

Britain’s decision to divorce with the EU because of the "Brexit" vote in the June 23 referendum could threaten the existing setup.

Daiwa Securities Group Inc. is also licensed to operate in Britain. It has about 400 people on its payroll at its main office in London and others in Paris and elsewhere in Europe.

“If the need arises, we may have to establish our base somewhere (outside Britain),” said Takashi Hibino, president of Daiwa Securities Group. “We will have to pay close attention to how the exit negotiations play out in the coming months.”

Nomura Holdings Inc., Japan’s largest securities institution, operates in five EU countries based on the single passport it gained in Britain. It employs about 2,500 people in Britain.

The EU hubs for the Bank of Tokyo-Mitsubishi UFJ and Mizuho Bank are in Amsterdam, but their branches in London serve as the core of their market-related business such as trading in foreign exchanges, stocks and bonds.

An analyst at a leading bank said the banks may opt out of London, depending on the future prospects of the City.

“I won't be surprised to see the banks relocate to other parts of the EU if the status of the City declines,” the analyst said.

(THE ASAHI SHIMBUN)