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Deutsche Bank Using Brexit as Convenient Excuse to Move Ops to Germany - Manager

© REUTERS / Kai PfaffenbachA statue is pictured next to the logo of Germany's Deutsche Bank in Frankfurt, Germany, September 30, 2016
A statue is pictured next to the logo of Germany's Deutsche Bank in Frankfurt, Germany, September 30, 2016 - Sputnik International
Germany’s largest lender, the Deutsche Bank, has moved most of its euro clearing activity from London to Frankfurt. For years, some 75% of all trade of financial products priced in euros worth 1.5 trillion a day was done in London. Financial and related services account of 12 percent of UK’s Gross Domestic Product.

Sputnik discussed the development with Mitchell Feierstein is a hedge-fund manager and CEO of the Glacier Environmental Fund Limited.

Sputnik: What impact could Deutsche Bank's move have on London?

Mitchell Feierstein: If you're talking about Deutsche Bank, let's look at the bigger picture and what's been going on with Brexit since it happened. You've had these naysayers, including the Bank of England, come out and politicize Brexit, say it's going to be the end of the world, the FTSE's going to drop to zero, sterling‘s going to collapse, doom and gloom, property is going to go to zero. None of that happened. In fact, the FTSE, the stock market in England, has rallied probably 30% since the Brexit lows of 40%, so the actual opposite has happened.

If you want to discuss what happened with Deutsche Bank, you've got to go back to 2014 or 2015, since that time period they've probably shed 50,000 (or more) jobs, and if you look at their stock, the price has declined 50% from 2015 to 2016, and it's on a precipitous decline in historic all time lows recently. So I think what you're seeing with Deutsche Bank is maybe more of a cost-cutting effort around the globe and they're using Brexit as a convenient excuse. So if you look at their business model, they've got rid of a lot of their high paid employees and moved out of certain business lines. So, Deutsche Bank is not indicative of what's going on, but it's an interesting speaking point.

READ MORE: EU Chief Brexit Negotiator Says Confident of Brexit Talks' Good Outcome

If you want to take a look at Brexit and the impact of Brexit, I think, what we should look at is what's going on in the EU and whether that is really working. The Bank of England raised interest rates, so if the economy was doing so poorly, they wouldn't go in and raise interest rates from a historic low of over 0.5% to 0.75%, so you're seeing anemic sub-par growth, and you're seeing understated inflation, they claim inflation is around 2% which is one of the biggest lies in the planet. Inflation is running hot, real inflation and consumer costs, the consumer realizes that these costs are much higher, substantially higher, which makes real interest rates negative.

So if you look at the EU as a whole and at what's going on, you see that Italy has an amount of debt that could never be repaid, $4 trillion or something like that, and this is mostly owed to Germany. So if you look at what's going on with Target 2, we see a massive influx out of the Italian banking system. So there's instability in Italy's banks because they're loaded to the gills with worthless Italian bonds, so there's more of a systemic problem than Brexit here. Brexit is being blamed for a lot of things when really what's happened is reckless central bank actions have precipitated a crisis that began and only made it worse by kicking the can down the road.

Sputnik: How likely is it that other banks will follow suit and shift their businesses away from London?

Mitchell Feierstein: London has always been a financial center, an English-speaking financial center, so is it likely that people will move because of Brexit? I believe that that's not the case. I think that the City will always remain a financial center of the world, because of the time zone, because it's English-speaking, and the history behind it. It's like saying would all businesses move out of Wall Street? I don't think so. I think that a lot of the infrastructure in the UK will remain intact, I think that Deutsche Bank is a one off, I don't think that people will leave, I think it's more hype and blame Brexit than anything else.

Sputnik: What is your forecast on Brexit outcome? This week we've been getting a lot of reports from London preparing for no deal scenario?

Mitchell Feierstein: Theresa May, who is most arguably the worst Prime Minister in the history of the United Kingdom, was a Remainer, so was she really motivated to get Brexit done and get the best deal for Britain? Probably not. Lord Astor, David Cameron's brother-in-law said before the vote that "even if there's a Brexit there won't be a Brexit", so there's a lot of people who don't want to see Brexit happen, so the naysayers out there keep trying to postpone it, kick the can down the road, and then say let's have another vote, so is that really democracy? Let's hope till we get the results that we want.

The views and opinions expressed by the contributors do not necessarily reflect those of Sputnik.

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