Bank of England will allow EU banks to carry on as normal after Brexit
European banks operating in the UK will be allowed to carry on as normal after Brexit.
The Bank of England will not force European-based investment banks to ringfence their capital and liquidity.
It will mean EU banks operating through UK branches can continue without creating subsidiaries – where they are compelled to hold their own substantial reserves in the event of a financial shock, essentially becoming UK companies.
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The move, to be announced on Wednesday, will be put in place even if Theresa May walks away from Europe without a deal.
More than 100 banks operating in London are branches of firms headquartered elsewhere in the EU. Currently, they operate in Britain under EU “passporting” rules which are due to expire when Britain leaves the bloc in March 2019.
The BoE’s plans would go some way to placate nervy banks and others in the financial sector of how the UK could continue to do business after Brexit.
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Earlier this week, the EU’s top Brexit negotiator Michel Barnier ruled out any special deal for the City – snubbing proposals ventured by the UK’s Brexit secretary David Davis.
He had pledged the financial services industry would get special “passport” arrangements after Brexit.
But Barnier said: “There is no place (for financial services). There is not a single trade agreement that is open to financial services. It doesn’t exist. In leaving the single market, they lose the financial services passport.”
There has been wide speculation of the impact on Brexit on the sector. Some have predicted tens of thousands of jobs could go abroad; others have suggested London would lose its status as Europe’s premier financial hub – particularly in the multi-billion euro clearing service.
However, most recent reports say the numbers of posts to be relocated is far fewer than first feared.