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The plan, which is being kept confidential as lawyers and regulatory experts refine the details, could put banks on a collision course with European regulators, which fear a “brass plate” syndrome of lenders not having a proper presence in their countries.
The focus of the Brexit debate for the big banks has been on which countries they will choose as their new centres within the European Union in order to retain access to the single market after Britain leaves. Several banks have warned that they might have to move hundreds or thousands of jobs to Paris, Frankfurt or elsewhere in the bloc. However, some with large operations in London are considering applying for licences in multiple EU countries and installing small branches.
This would mean they would only have to move a few staff, who would have direct contact with clients, while the majority would stay in London to execute trades. Banks could then keep their capital in London, which would be cheaper and less disruptive.
Barney Reynolds, co-head of financial institutions at Shearman & Sterling, another law firm, said: “Banks would most likely only need a few branch licences in the EU, where they do most of their business. They would keep their capital in one pot, effectively in London.”
Banks could use the approach until the details of Brexit emerge. Large firms are worried about having enough time to prepare for Britain’s exit in 2019, as the practical and regulatory hurdles to setting up big subsidiaries in new jurisdictions will take years. With EU negotiators, led by Michel Barnier, insisting that Britain agree its divorce terms before talks on a future relationship can begin, time may be short.
Banks, which are allowed to set up branches overseas with regulatory approval, are overseen by the home regulator, in this case the UK’s Prudential Regulation Authority.
Full article on The Times (subscription required)