TD to hedge bets on Brexit with expansion at Dublin office

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Toronto-Dominion Bank will begin building out a trading hub in Ireland that could form the core of its contingency plan for London-based staff left in limbo by Britain's looming Brexit.

The bank, which is Canada's largest by assets, announced plans for a modest expansion of an existing office in Dublin after executives met with Irish Prime Minister Leo Varadkar in Toronto this week.

Despite TD's 20-year history in Ireland, its Dublin office has only two staff. By January, it expects to have up to 10 as it builds a bond trading unit by adding new hires, subject to regulatory approval. For now, the office won't be taking transplants from London, where TD maintains a staff of about 300 people.

But as Britain barrels toward an exit from the European Union as early as 2019, Canadian banks are exploring their options and crafting backup plans that could peg major cities such as Amsterdam, Frankfurt and Paris as hubs for EU business. Several globally influential lenders – such as Bank of America Corp., which chose Dublin as its new European hub – are already promising to bulk up in cities where they have established operations. In doing so, they aim to take advantage of familiarity with local regulatory regimes and sometimes favourable tax rules.

"It's the history that we have operating there, and the strong relationships that we already have, including with the regulator" that made Dublin especially attractive, Peter Walker, regional head for Europe and Asia-Pacific at TD Securities Inc., said in an interview.

"I think language is another factor," he said, as English is widely spoken.

The tiny outpost maintains operations for TD's regional broker-dealer business, but the bank wants to build up its fixed-income capabilities, which are TD Securities' most important business in Europe. Whether that will lead to a larger shift in gravity from London to Dublin remains to be seen, as TD works through its planning and tracks Brexit negotiations.

"We'll structure ourselves as we need to, but we haven't made those decisions as of yet," Mr. Walker said. "We continue to be committed to London, and we expect it to be a big part of our European operation going forward."

Other large Canadian banks are sending similar signals. Royal Bank of Canada's roots in London date back to 1910, and it has the largest European presence of any Canadian lender with more than 5,000 staff. But even as it plans a move to a new office tower in the city's Bishopsgate ward, the bank has explored contingency plans. RBC already has capital markets staff in Paris and Frankfurt, and other operations in Dublin.

"We continue to monitor developments closely, and we're confident in our ability to support our clients and employees in whatever future operating environment may result from the U.K. leaving the EU," a spokesperson said.

Bank of Montreal has about 1,100 employees in its European operations, which include a licence in Ireland and asset management platforms in the Netherlands, Germany and Portugal. "Our commitment to our customers in the U.K. and broader EU remains unchanged," a spokesperson said. "London will remain a focal hub and we will effectively manage through the transition to continue doing business and serving our Global Asset Management and Capital Markets clients in Europe."

Britain faces the prospect of losing its "passporting" privileges, which allow London-licensed bankers to do business across the continent. For months, several European cities have been in fierce competition to lure a slice of London's banking elite. Civic leaders have tried advertising campaigns, offered government aid and made diplomatic overtures to try to secure the spoils of the landmark economic breakup.

Most Canadian banks are not major players in Europe. But Mr. Varadkar called TD's expansion plan "a great win for Ireland," and said he goes on trade missions specifically "to bring about these kinds of announcements."

Bank of Nova Scotia has operations in Britain and Ireland, and is reviewing its post-Brexit options. A spokesperson said the bank has "optionality on how and where we best serve our customers."

Canadian Imperial Bank of Commerce has a couple of hundred employees in London. A spokesperson said the bank is "committed to serving our clients in Europe and we continue to assess our options."

National Bank of Canada, which has 20 capital-markets staff in London and a few more in Dublin, isn't contemplating any changes for now.