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Banking

Morgan Stanley/MUFG agreement goes from potential feast to dog’s dinner

Complex new arrangement splits venture in two; MUFG CEO says no sale of stake in MS for now .

Morgan Stanley and Mitsubishi UFJ Financial Group have scaled back plans to fully merge their securities operations in Japan, citing ‘recent trends in the global financial regulatory environment’ in a jointly released November 18th ‘update’ to the original plan announced back in March. In the new arrangement, rather than create a single joint venture the two parent firms will continue to operate two subsidiaries.

The first, Mitsubishi UFJ Morgan Stanley Securities (already being referred to as ‘MUMSS’), will contain the existing wholesale and retail business of Mitsubishi UFJ Securities while gaining the investment banking operation of Morgan Stanley Japan. The second, Morgan Stanley MUFG Securities (MSMS), will include the remaining non-investment banking operations of Morgan Stanley Japan — namely capital markets underwriting, sales and trading, securitization and prime brokerage. The idea is that MUMMS will take the role of deal origination through a combination of Morgan Stanley’s investment banking expertise and MUFG’s deep client networks in Japan, with the resulting underwriting, sales and trading duties shared between the two entities — both of which will retain those capabilities — according to criteria dictating priority that have yet to be determined.

A senior official at Morgan Stanley who did not wish to be named but was authorized to respond to Euromoney’s questions about the announcement, said the following when asked why the firms had changed their plans:

“The reasons for this decision are complex if you drill down, but from a broad perspective quite simple: our goal is to take full advantage of both firms’ networks and strengths, and the easiest way to do that is through a two-company structure.”

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