Yahoo Finance Bailey tells banks to ramp up plans for no-deal Brexit
Britain's largest banks have been told to step up their plans for a no-deal Brexit amid rising fears the UK could crash out of the EU without a deal.
Bank of England Governor Andrew Bailey has told bank bosses on a private call that they must be ready for the UK and EU to not reach a trade agreement, Sky News reported.
The UK enters its fourth round of trade talks with Brussels this week, following the last round which ended with the two sides divided over fishing. Britain’s chief negotiator ruled out giving European boats access to UK waters in return for better conditions for British financial services.
The finance sector, which contributed a record £75.5bn in taxes last year, has been a key battleground since the Brexit vote and bank chiefs have grown increasingly concerned that their access to the bloc could be cut off without a deal in place. The UK's transition period ends in December unless officials agree to an extension.
Mr Bailey has regular calls with the chief executives of the UK's largest banks Lloyds, HSBC, Barclays and Royal Bank of Scotland. Since the EU referendum they have been preparing for a worst-case Brexit scenario including setting up hubs in rival EU cities.
However, resources have been strained by the coronavirus pandemic as banks focus on getting out government-backed loans to businesses. Lenders now face tens of billions of pounds in loan losses due to the crisis.
City sources said earlier this year that London’s status as a global financial hub was a bargaining chip for the UK in trade negotiations because it meant the EU will want to maintain access to the City.
Brussels has already rejected calls for an improved system of regulatory recognition to replace the "equivalence" model on offer. There are fears in the City that equivalence will make Britain a rule-taker.
A Bank of England spokesman said the "possibility that negotiations between the UK and EU over a future trading relationship might not conclude in a deal is one of a number of outcomes that UK banks need to prepare for".
