A major Russian bank is turning its back on London because of Brexit

VTB, Russia’s second biggest bank, is moving its European headquarters out of London in response to Brexit, according to a report in the Financial Times.

VTB, which is 61% state-owned by the Russian government, is considering a range of European cities to host its EU base.

“We did have bigger plans for the London office, but after Brexit we are scaling them down and building them up elsewhere,” Herbert Moos, VTB’s chief financial officer told the FT in an interview. “Our board will decide where by the end of the year.”

Moos said: “We are looking at several factors to decide where we switch our European headquarters to, including regulation, fiscal policy and the talent pool. Frankfurt, Paris and Vienna are all being considered.”

Last month Bloomberg reported that the Russian lender had plans to expand in the Swiss town of Zug, as well as Singapore and Hong Kong, to boost its commodities trading business.

Moos’ comments mirror those made by Morgan Stanley CEO James Gorman at a conference last week organised by the International Institute of Finance. Gorman said the bank was looking at whether it needs a to move employees to different financial centres.

“Do you have the infrastructure you need in any of these places?” Gorman said, according to the FT. “I think the big winner is going to be New York. I think that will be one of the big consequences here.”

Britain risks losing its financial passport rights to offer and sell services in the European Union without restrictions. Many US investment banks use their base in London to passport into the single market of 28 EU member states.

Prime Minister Theresa May’s government has raised the possibility of a so-called Hard Brexit, which prioritises control over immigration, as opposed to maintaining some economic links in return for concessions on freedom of movement. The Times reported that it would will cost the UK £66 billion ($81.2 billion) a year in lost tax revenues.

Such a move would also lead to the automatic loss of the City of London’s EU financial The loss of passporting rights would be devastating to the City of London. The Financial Conduct Authority (FCA) said earlier this year that 5,500 UK companies rely on passporting rights, with a combined turnover of £9 billion.

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