Yahoo Finance 'Significant' loss of financial activity likely post-Brexit, ECB warns
Britain could see a significant flight of financial activity after Brexit if its companies do not share EU regulations, according to a warning from the European Central Bank.
Many of the world's major banks are already preparing to move their European headquarters from Britain as early as next year, fearing a hard Brexit which would see the loss of single market membership.
A major part of their uncertainty is based on whether Britain will keep its access to the EU's passporting scheme, which allows banks to trade seamlessly across the European market without needing licences in individual countries.
:: What is passporting and why is it important?
ECB council member Philip Lane said on Friday: "If the UK-EU negotiations deliver an agreement that effectively preserves the single passport for UK-resident entities selling into the EU, the net impact on the structure of the European financial system might be quite minor.
"However, in scenarios in which UK-resident firms are no longer treated as equivalent to EU firms for regulatory purposes, it is likely that significant migration of financial activity from the UK to the EU will occur."
European cities are already jostling for the new business they expect when the banks move and among the contenders is Dublin, where Mr Lane is governor of the Central Bank.
He said he had seen more inquiries from financial services companies since Britain voted to leave the European Union in June.
But he added that it is unlikely that activity will focus on a single European city, as there was no real substitute for London.
And, while some may think Britain has escaped short-term pain since the referendum, with the economy slowing only slightly in the three months following the shock result, Mr Lane warned a Reuters Newsmaker event that worse lies ahead.
He said: "The transition towards the phase of active UK-EU negotiations that will begin in spring 2017 may trigger a more substantial reassessment of post-Brexit economic prospects."
