No bank would comment publicly, but some said privately that they were “surprised” not to have been asked. One bank said it might be politically difficult for the PRA to ask since regulators do not wish to be seen to interfere in the political process.
Banks in Ireland have been formally asked to give impact assessments for Brexit to their regulator Cyril Roux, who believes an exit could have a “major impact” on Irish banks who have as much of half of their business in the UK.
The implications for banks in the UK is far greater, since many of them use the UK as a springboard for access to the rest of the EU. That access could be jeopardised if the UK uses a summer vote to leave the EU. Some banks have already flagged the potential risks in annual reports and other filings.
Andrew Tyrie, chairman of the Treasury select committee in Parliament, said he expected the PRA to “ensure that contingency planning is being undertaken [at the banks, and all other financial institutions].
“As with a good deal of microprudential supervision, most of this work is likely to need to remain confidential,” he added.
The PRA would not comment specifically on what it had asked banks to do in respect of Brexit but said it “expects banks to assess the risks affecting their business which arise from potential changes in the economic and political environment and to manage these accordingly.
“Discussions between the banks and the PRA on these issues are rightly confidential,” the PRA added.
Andrew Bailey, the chief executive of the PRA, told a parliamentary committee last week that banks had been asked about their exposure to sterling risk options, whose pricing could be volatile in the aftermath of Brexit.
© Financial Times
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