Bank of England: Deal or no deal, EU banks to be able to operate as normal

The Bank of England preparing to reveal plans allowing European banks to operate as normal, whatever the final Brexit deal, according to reports.

Lenders offering wholesale finance – commercial and inter-bank services – will be able to operate under existing rules, the BBC has learnt.

EU lenders that operate in the UK under a branch – rather than a subsidiary – network would receive the greatest benefit from the proposals.

The UK central bank will unveil plans later today that would minimise disruption even in a “no deal” scenario.

Many overseas lenders – for example, Deutsche Bank and Nordic giant Handelsbanken – operate in the UK under a branch rather than subsidiary structure. Branches circumnavigate the need for lenders to hold costly capital buffers for UK operations. They also allow for swifter money transfers and in the event of an insolvency mean customer cash is swept back to an overseas parent instead of being locked in the UK.

Read more: Bah humbug: City hits out at Barnier hard talk on Brexit trade deal

The cost of changing from a branch to a subsidiary in order to continue to operate in the UK post-Brexit could cost EU lenders billions of euros. As a result, they may prefer to move operations away from the UK instead of incurring such a cost to protect against the fall-out of Brexit.

The Bank of England has been approached for comment.

The plans come after EU Brexit chief negotiator Michel Barnier on Monday played hardball on thorny topic of financial services.

“There is no place for [financial services]. There is not a single trade agreement that is open to financial services. It doesn’t exist,” he said.

Read more: No special Brexit deal for the City of London, says Michel Barnier

Full story: Bank of England: Deal or no deal, EU banks to be able to operate as normal: City A.M.

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