The Bank of England should fast-track licensing of European banks that want to continue doing business in London after Brexit to avoid cutting off customers and disrupting markets, bankers and financial lobbyists said.
There are 106 banks in London that are branches of lenders headquartered elsewhere in the EU. They operate here under EU “passporting” rules, but are uncertain whether they can still do business in Britain after it exits the bloc in March 2019.
BoE Deputy Governor Sam Woods is due to say by the end of the year whether any or all of these branches must reapply for branch licences to operate after Brexit, or even become a subsidiary.
Establishing fully-fledged subsidiaries can be a costly move for EU-headquartered branches, said a Brexit paper from TheCityUK lobby group seen by Reuters.
Switching from being a branch to a subsidiary means having to build up buffers of capital and cash locally. “A change of policy could have wider cost implications for UK and EU27 businesses and customers alike,” the Brexit paper said.
“The UK has always benefitted from its openness to foreign business, this is a key component of its international competitiveness,” it said.
The Association for Financial Markets in Europe (AFME), which lobbies on behalf of European lenders, urged the BoE to take a "pragmatic" approach.
Avoiding cliff edge
AFME said in an unpublished briefing note that any licence applications for branches already up and running should be “grandfathered” - that is, the existing licence is rolled over--or fast-tracked, a person who has seen the note said.
AFME warns that the fate of EU bank branches could become a “cliff edge”, and especially by March next year, given that 12 months are typically needed to obtain a new licence from a regulator, the person added.
TheCityUK called for “imminent clarity” on the issue.
Woods, along with BoE Governor Mark Carney, is due to appear before parliament's Treasury Select Committee on Dec. 20 to discuss last month's Financial Stability Report.
Last week Britain and the EU agreed to open talks on a transition period of about two years to follow Brexit day--a step bankers say would make it easier to implement their staff and business moves from London to new hubs on the continent.
But AFME says that some market risks would still need to be addressed by authorities irrespective of whether a transition deal is agreed, the person said.
TheCityUK also calls for Britain to continue allowing EU-regulated mutual funds known as UCITS to be sold in the UK. Many of the funds are listed in Luxembourg and Dublin but are run from London.