- Bank of England set to announce plans that will allow EU banks to keep operating in the UK more easily after Brexit, the BBC reports.
- Plans centre around allowing EU lenders to operate branches, rather than subsidiaries in Britain.
- New proposals are likely to be announced later on Wednesday when the BoE publishes its findings on its “Approach to the authorisation and supervision of international banks, insurers and central counterparties” at 1.00 p.m. GMT (8.00 a.m. ET).
LONDON — The Bank of England is expected to propose a set of new plans that will allow certain European lenders offering wholesale finance to keep operating as normal in the UK once Britain leaves the EU.
The BBC reported early on Wednesday morning that the central bank will propose that EU banks currently operating branches in the UK will be allowed to keep operating through those branches, rather than being made to set up new UK subsidiaries — which would be both time consuming and costly for banks.
These new proposals are likely to be announced later on Wednesday when the BoE publishes its findings on its “Approach to the authorisation and supervision of international banks, insurers and central counterparties” at 1.00 p.m. GMT (8.00 a.m. ET).
Due to current EU regulations, most major European lenders operating in the UK do so through branches, which offer an easy, cheap way of moving money and services around the continent.
Branches hold the added bonus that for lenders banks can quickly pull cash back to their main business — say for instance, Deutsche Bank moving money back to Germany — in the event of a major crisis. That can be bad news for customers, who can lose access to financing.
Subsidiaries on the other hand are a far more complex form of business structure that essentially forces banks to create a new version of themselves that becomes a UK company. They must conform with tougher rules on capital buffers, tying up more cash.
“Encouraging EU banks to continue to operate in the UK will help preserve financial stability for the UK and the EU and will help defend London’s position as an open global financial centre,” Miles Celic, head of the lobbying group TheCityUK said in a statement.
The future of the City of London and the wider UK financial sector has been up in the air since the Brexit vote, with fears about the loss of the so-called financial passport causing many overseas lenders to announce plans to set up new EU operations away from the UK.
Those fears were compounded somewhat this week when the EU’s chief Brexit negotiator, Michel Barnier ruled out a free trade deal with Britain which includes financial services unless Britain remains in the single market.
“There is no place [for financial services]. There is not a single trade agreement that is open to financial services. It doesn’t exist,” Barnier said.