US Regulators Tell Banks To Prepare For Brexit

US financial regulators have told the country's banks to prepare for a UK departure from the EU after June's referendum.

The Federal Reserve, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency - which jointly supervise US banks - have ordered them to present regular updates on their 'Brexit' contingency plans.

The scenarios include how the banks' London operations would cope with a lengthy period of uncertainty following a British vote to leave the European bloc, and whether US banks could continue to offer financial services in continental Europe from a non-EU Britain.

It (Other OTC: ITGL - news) is understood that the banks, many of which run most of their European operations from London, are also being asked to consider how they might handle staffing and their IT operations across Europe.

One banking source told Reuters: "We've been actively asked to do this within the last six weeks.

"It involves scenario planning, stress testing different outcomes: you pick a highly impactful, negative scenario that's bad but plausible and you work through the implications for the business.

"We will all live with whatever comes out but if you don't know what's coming and when it's coming, then that will really spook people."

The latest poll - by Ipsos MORI for The Evening Standard - has support for Britain to remain in the EU at 49%, 10 points ahead of the 'out' campaign.

Bank of England Governor Mark Carney has previously warned that an anti-EU vote could see some banks leave London and on 19 April he told MPs he was seeking similar contingency plans from domestic and foreign banks operating in London.

The Federal Reserve, FDIC and OCC declined to comment, as did the major US investment banks in London - Bank of America Merrill Lynch, JPMorgan, Citi, Goldman Sachs (NYSE: GS-PB - news) , and Morgan Stanley (Xetra: 885836 - news) .

The news comes as the City of London (LSE: CIN.L - news) warned of "serious consequences" for a 'leave' vote.

Mark Boleat, political leader of the financial district's municipal body, said: "If the UK votes to leave the EU, there would be serious consequences for the City of London's role as an international financial centre."

London accounts for 41% of global foreign exchange turnover, for example - more than double of its nearest rival New York - but Mr Boleat said that a non-EU Britain would have no say over rules that would apply to institutions seeking to operate in the EU.

However, Brexit supporter Michael Gove has said that, just as warnings about not being part of the euro were unfounded, similar warnings about leaving the EU would be proved incorrect.

"We were told before when the single currency was being established, London would shrivel and die if we were outside the single currency," the Justice Secretary said on Tuesday.

"If we are outside the European Union but part of a free-trade zone, the ingenuity, the energy and attractiveness of London as a financial capital, will ensure our financial services continue to thrive.

"Those of us who want to leave believe that Britain's best days lie ahead, that our country has tremendous untapped potential which independence would unleash."