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While attention has so far focused on the potential damage Brexit could inflict on the investment banking industry, the less exotic areas of lending, savings and payments will also be affected.
According to a 117-page British Bankers’ Association report that maps out the challenges Brexit poses to the sector, the UK credit-card industry — dominated by Barclaycard — issues 73 per cent of all cards across the EU. It could see its market share eroded, while customers may face stiff fees from retailers or cash machines across the bloc.
The BBA report warns that the ability of UK customers to make payments to the EU could be “significantly harmed” by the country falling out of payment arrangements such as the Single Euro Payments Area.
Brussels’ rules around payment services do not allow for “equivalence”, which are rules on how overseas companies can gain access to specific parts of the EU financial-services market.
The BBA report calls on the UK government to negotiate new market access arrangements in a bilateral agreement with the EU.
The report explains that once it left the EU, the UK would no longer be part of the bloc’s Interchange Fees Regulation (IFR), which limits the charges for merchants accepting credit or debit cards and prevents retailers from discriminating against regulated cards.
“UK card service providers may find it difficult to maintain their existing position in the UK,” it warns, adding: “UK-issued cards may be less accepted in the EU27 since they will incur higher costs for retailers.”
But it says that this could be addressed if the UK makes a public commitment to maintain similar rules for card charges to those in the IFR.
Private banking “will be particularly badly affected”, the report warns. Wealthy clients that use private banking services are classed as retail customers and there is no equivalence regime for retail customers, meaning the UK private banks could be cut off from EU clients. Private bankers typically travel to wealthy customers based overseas to offer their services.
Full article on Financial Times (subscription required)