J.P. Morgan Studied Its Own Brexit -- WSJ

By Emily Glazer 

J.P. Morgan Chase & Co. Chief Executive James Dimon had his bank weigh the possibility of its own type of Brexit years before the U.K. voted to leave the European Union.

The research, done around 2011, concluded that certain European moves wouldn't make financial sense. This underscores how difficult and potentially costly any moves may be for banks if they are forced by Brexit to relocate some of their businesses from the U.K. to other countries within the EU.

Last week, Mr. Dimon said on a quarterly earnings call he hoped politicians would be "very sensible" on decisions relating to the EU and the U.K., such as giving businesses years to adjust to the new reality. He said the bank will continue to serve clients in European countries, even if costs increase. The bank is prepared for "a range of outcomes," he added.

J.P. Morgan and other large banks are examining relocation strategies in light of Brexit, though most stress the discussions are at an early stage. J.P. Morgan's analysis includes the pros and cons of moving several hundred employees from the U.K. to other European countries, though it doesn't currently envision creating a new European headquarters to replace London, people familiar with the matter said.

Back in 2011, Mr. Dimon, head of the largest U.S. bank by assets, ordered an analysis to see whether it would be worthwhile for J.P. Morgan to relocate businesses or employees from the U.K. and other countries to elsewhere in Europe, current and former employees said.

That was roughly five years before the U.K.'s vote to leave the EU upended markets.

Mr. Dimon's call for the European analysis came around the time the U.K. changed tax rules and brought in tougher capital regulations. This made it more expensive to do business in the region, these people said.

Mr. Dimon wasn't happy with the moves. During meetings with then-Prime Minister David Cameron and then-Chancellor George Osborne, he voiced his frustration. But no major changes resulted, a person familiar with the matter said.

Mr. Dimon decided to consider his alternatives. He tapped the bank's corporate strategy team, a small group within J.P. Morgan that analyzes a variety of potential situations.

In terms of examining whether J.P. Morgan should relocate jobs or businesses outside of the U.K. or other European countries to elsewhere in the continent, the corporate strategy team within the firm's investment bank got to work. It tapped executives, particularly finance chiefs, to analyze a variety of metrics, ranging from relocating employees to the cost of booking trades in various countries, a person familiar with the analysis said.

For some business lines and employees, areas such as Frankfurt and Luxembourg were analyzed as alternative geographic possibilities, this person said.

But the economics just didn't line up. The corporate strategy team recommended to Mr. Dimon and other top executives that there wasn't enough cost savings to justify a major geographic change for businesses or employees from the U.K. or other European countries to elsewhere in Europe, people familiar with the matter said.

Write to Emily Glazer at [e-mail]

(END) Dow Jones Newswires

July 19, 2016 02:47 ET (06:47 GMT)

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