Russia's VTB Bank announced it would move its Headquarter out of London following Brexit.
The state-controlled bank is the first major lender to desert the UK following its historic decision to leave the European Union (EU).
Herbert Moos, deputy chairman and chief financial officer of VTB, said: "We did have bigger plans for the London office, but after Brexit we are scaling them down and building them up elsewhere."
Speaking to the Financial Times, he added that the board would decide on a new location by the end of the year and is considering a move to Frankfurt, Paris or Vienna.
What is VTB Bank?
VTB is the second largest bank in Russia by assets and is 61 per cent state owned.
It was the subject of a $5 billion state recapitalisation program in July which formed part of a wider state plan to stimulate lending amid a sluggish economy.
The bank has been forced to scale back its presence in Europe and the US after sanctions were introduced following Moscow's annexation of Crimea and involvement in Ukraine.
The sanctions have blocked VTB from raising long-term loans in western markets. As a result the bank has placed more emphasis on its Asian business.
Would does VTB Bank's exit from the UK mean?
VTB employs around 330 people in its UK office. Mr Moos said that London would "remain an important presence for us, just not our European hub', suggesting that many jobs will be saved.
Dr Steve McCabe, economist at Birmingham City University's Business School, said that VTB could be using Brexit as an excuse to close down its London operations in the face of difficult EU-US sanctions.
"On the face of it the decision by VTB bank to move its investment banking division out of London is troubling. Certainly there is a potential for others to follow VTB's example,"he said.
"However, in the case of VTB there is the added dimension of the fact that it has been subject to sanctions because of Russia's involvement in the separatist war in eastern Ukraine in 2014.
"VTB may be using Brexit as an excuse to close down its operations in London. Nonetheless, we should be under no illusion that other significant investment banks may decide that relocating away from London after Brexit may present better opportunities than remaining in the capital.
In August the bank announced that it had culled almost 100 staff in the past year as part of an effort to shrink its losses. It had already reduced its real estate in the capital to just five floors at 14 Cornhill.
Many other major banks including HSBC and Barclays have reaffirmed their commitment to the UK and have said that they intend to remain based in London.
The announcement comes as Sterling hits a 31-year low against the dollar. It is currently at its weakest since 1985.
Mervyn King, the ex-Bank of England Governor, has welcomed the drop and said it is "not the end of the world'.
He told Sky News: 'The economy was slowing somewhat before the vote and we are in a position where the rest of the world is not offering us much help.
"So from that point of view the fall in sterling is a welcome change."
Dr McCabe added: "Looking at the way that the pound has plunged against the dollar and the euro shows that financial investors are already computing in a loss in value. VTB's decision may therefore be a worrying portent of the future.'
What effect is Brexit having on the banking industry?
VTB's decision to move its headquarters out of London comes amid uncertainty over the terms of Britain's future relationship with the EU.
Theresa May has refused to "give a running commentary"on Brexit talks, though recent comments indicate that the Government is leaning towards a "hard Brexit"outside of the European Single Market.
City bosses have lobbied for the UK to negotiate access to the free trading zone which brings with it bank passporting rights, which allows financial services to be sold freely across the EU.
Brexit minister David Davis has hinted that the Government could broker a deal which retains these rights. He said: "Actually, we issue more passports than we seek. As a result, our negotiating leverage in this area is at least reasonable."
Addressing parliament on Monday October 10, he added that that the Cabinet had been considering alternative arrangements to enable banks to trade across borders.
"The Treasury has already had a roundtable on specifically this issue and looked very clearly at mutual recognition and various mechanisms of mutual recognition as a fallback on passporting," he said.
A new report published by the consultancy Oliver Wyman for lobby group CityUK has suggested that £10 billion in tax revenues and 71,000 jobs could be lost if the UK becomes a "third country"entirely outside of the EU.
The research suggested that a deal which puts the UK outside of the European Economic Area (EEA) but retains passporting and some Single Market access would result in a much more modest impact, putting just 4,000 jobs at risk and resulting in a £0.5 billion drop in tax revenues.
John McDonnell, the shadow Chancellor, has warned that a "hard Brexit"could cost the Treasury £66 billion a year in total tax revenues.
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