Big Catalan Bank to Relocate From Region Amid Separatist Drive

By Max Colchester in London, Jon Sindreu and Jeannette Neumann in Barcelona Features Dow Jones Newswires

Banco de Sabadell, one of Catalonia's biggest banks, said on Wednesday it will move its headquarters out of the restive Spanish region, as the area's second big lender, CaixaBank SA, considered a similar move.

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The strategies underscore how the separatist drive is roiling Spain beyond politics and into the realm of business and economy. Sabadell said it would move its legal base to Alicante, Spain, following a decision by its board.

Surges of separatist sentiment in other nations have long pushed banks to either relocate or consider it. In Catalonia, any move could prove cosmetic in the end, with the legal headquarters leaving the region but staff and executives largely staying, analysts say.

Some of these people said the moves were likely a form of cheap legal insurance to protect banks against lawsuits if shareholders and clients lost money because of the region's secessionist drive.

Banco de Sabadell's board was meeting Thursday afternoon to approve moving their headquarters from Barcelona to another Spanish city, said an official with the bank.

Bankers and investors said CaixaBank could also shift its legal headquarters away from Barcelona to another part of Spain. In a statement, a CaixaBank spokesman said the bank "reiterates that the necessary decisions will be made, in a timely manner."

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Shares in the two banks have plummeted this week -- including at least 5% on Thursday -- after Catalonia's local government staged an independence referendum on Sunday, defying courts and the Spanish government who declared it illegal. That stoked fears that local banks may suddenly find themselves outside the eurozone and cut off from European Central Bank's emergency liquidity facilities.

Analysts said that while an independent Catalonia could retain the euro as its currency, its lenders would likely need to go through other eurozone banks to tap ECB funding. If Catalan banks run into trouble they also wouldn't have a powerful central bank to help them out. Catalan banks also seek to remain protected by the Spanish government's deposit guarantee fund.

The Catalan crisis "could lead to a premature end for the cyclical upswing in the euro area which would weigh heavily on already overvalued European equities," Tim Davis and Andrew Harris, economists at Fathom Consulting, told clients in a research note Thursday. "Sectorally, Spanish banks may be the most adversely affected."

Earlier this week ratings agency Standard & Poor's said it was considering downgrading Catalonia's debt.

Ahead of Scotland's 2014 independence vote, Lloyds Banking Group PLC and Royal Bank of Scotland Group PLC said they would shift their legal headquarters to England if the country split from Britain. RBS and Lloyds executives feared a massive withdrawal of deposits by panicked customers in Scotland if the country became independent. A major reason: Scottish banking assets would be 12 times the size of Scotland's gross domestic product. Investors worried Scotland wouldn't have the financial muscle to stand behind the banks in times of stress.

In the end both banks stayed put when Scotland voted against independence. (The issue is not completely off the table, as the Scottish National Party tries to stage another vote following the Brexit referendum.)

Canada's financial service industry, including insurance giant Sun Life, began migrating from Montreal to Toronto as secessionist sentiment boiled up in the French-speaking province of Quebec in the 1970s.

The U.K.'s Brexit referendum -- an independence vote of sorts -- hasn't had the same dramatic effect. Banks who deal with European clients from their London offices may have to create subsidiaries in the EU to service their needs instead. But the U.K.'s economy has enough heft to be seen as a stable place to house a large financial industry, whether the country is in the EU or not.

Since the Catalan government started its push towards independence, Catalan banks have tried to assuage investors' fears while not angering local clients. CaixaBank has 22% of its business in Catalonia and Banco de Sabadell has 26% there, the banks' figures show.

Moving headquarters is unlikely to have a profound effect on how the banks do business. Last month, Banco de Sabadell's chief executive Jaume Guardiola said the decision would likely entail "a change in domicile" with no people being moved -- the biggest impact being that more board meetings would need to be held in the new headquarters. The bank could move to the Spanish cities of Alicante, Oviedo or Madrid, an official said.

In Spain, many banks were built up in peripheral, industrialized regions before moving their headquarters to Madrid. Spain's two largest banks, Banco Santander and Banco Bilbao Vizcaya Argentaria SA, BBVA, are based in Santander and Bilbao respectively, but have their legal headquarters in Madrid.

Catalan officials argue an independent Catalonia would soon attract any departing bank back because they would "guarantee the continuity of European financial regulation."

"There won't be a shortage of banks in an independent Catalonia, just like there isn't in European countries of similar size, like Denmark, Austria, Finland or Switzerland," said Natalia Mas, the Catalan government's chief of economic and financial analysis.

But some pro-independence activists are taking a tougher line. On Friday, the left-wing party Candidatura d'Unitat Popular, which has 10 lawmakers in the Catalan parliament, suggested the regional government should stop dealing with CaixaBank, Banco de Sabadell and BBVA.

Write to Max Colchester at max.colchester@wsj.com, Jon Sindreu at jon.sindreu@wsj.com and Jeannette Neumann at jeannette.neumann@wsj.com

(END) Dow Jones Newswires

October 05, 2017 12:35 ET (16:35 GMT)