Large U.S. banks cut exposure to the United Kingdom in the third quarter of 2016, following the "Brexit" vote in June.
Banks report exposure to countries outside the U.S. on Form FFIEC 009a if that exposure exceeds certain thresholds. The FFIEC includes a variety of claims in its definition of exposure, including deposit balances, securities, federal funds sold and loans, along with many other types of assets.
Out of the eight "large financial institutions" included in the FFIEC E.16 country exposure lending survey, seven decreased exposure to the U.K. in the third quarter of 2016, compared to the end of June 2016. Only Wells Fargo & Co. posted an increase in exposure, albeit just a 0.2% gain quarter over quarter to $27.91 billion.
Citigroup Inc. had the highest exposure to the U.K. at $116.38 billion as of Sept. 30, down 7.2% from the previous quarter. JPMorgan Chase & Co. and Bank of America Corp. followed next with $98.16 billion and $73.72 billion in exposure, respectively.
Morgan Stanley had $63.26 billion of exposure as of Sept. 30, down 10.2% from the previous quarter. During the company's fourth-quarter 2016 earnings call Jan. 17, James Gorman, chairman and CEO at Morgan Stanley said: "We like the U.K., we like the rule of law in the U.K., we like having our businesses there, and our aspiration is to keep as much of our business there as possible. But to the extent we have to comply with the Brexit rules, we'll be putting our headquarters somewhere in Continental Europe then, that will have some implications going forward, but it's a little early."
As a result of the Brexit referendum, Citigroup and Morgan Stanley will have to move as many as 100 and 1,000 jobs out of Britain, respectively, according to a Jan. 20 Reuters article.
According to the E.16 report, U.S. banks held an aggregate $622.63 billion in exposure to the U.K., including $481.98 billion at the eight "large financial institutions."
Click here to view the Sept. 30, 2016 FFIEC 009a report and here to view the E.16 report. |
