Exclusive: Report says EU firms face higher banking bills after Brexit

Thrugelmir

In the news.

A report has concluded that a so-called hard Brexit could cost banks up to 35 billion euros (30.7 billion pounds) and European customers were being overly optimistic if they thought lenders would pick up the bill, an industry source said on Friday.

The conclusions may surprise businesses as company treasurers contacted by Reuters in recent weeks have said they fully expect their banks to sort out and absorb any Brexit-related costs to keep their custom.

The source was quoting from a report on the impact of Brexit on companies and investors commissioned by the Association for Financial Markets in Europe (AFME), a banking industry lobby group, and compiled by the Boston Consulting Group.

The report, due to be published next month and could still be changed, surveyed officials from more than 60 companies, most of which expected any higher costs from an abrupt cut in financial services links between Britain and the rest of the EU to be absorbed by banks.

The report concluded that, "this may be overly optimistic", the source said.

It said that banking capacity could be maintained after a hard Brexit - where Britain ends up outside the single market altogether - if banks in London operated from new subsidiaries in the European Union after Britain leaves the bloc in 2019.

But reconfiguring banks would be "slow" and could cost as much as 15 billion euros which, if spread over three to five years, could cut banks' return on equity by 0.5 to 0.8 of a percentage point.

Fragmenting Europe's capital markets would also force banks to hold up to 20 billion euros in extra capital across the sector, the source quoted from the report.

The aim of the report is to show policymakers negotiating Britain's departure from the EU that failing to give banks in London access to the single market would hit Europe's companies and economy.

http://uk.reuters.com/article/uk-britain-eu-banks-idUKKBN19E1RD

MPD

Sounds like a huge opportunity for any bank wanting to take business away from London.

A_Medium_Size_Jock

Meanwhile global insurers have requested that the EU continue mutual access with the UK post-Brexit:

Global reinsurers have written to the European Commission to ask it to ensure mutual access between British and European Union reinsurance markets after Britain leaves the bloc due to worries about market disruption, according to extracts from the letter seen by Reuters.

http://uk.reuters.com/article/us-britain-eu-reinsurance-idUKKBN19E22B

Just as with clearing (see below) and the possible negative consequences for the EU as well as the UK, should the EU persist it will appear globally to be no more than an act of attrition for leaving the EU since neither party would benefit.
Is that really going to improve the global view of the EU - or even improve upon the negativity which already exists within the EU itself?

Clearing - the UK already clears 18 major currencies and many knowledgable people question the EU's desire to move clearing to within the Eurozone.
There is lots available, but here is just one example:

"If Europe insists on trying to implement an artificial, inefficient location policy, it will only hurt the European capital markets and real economy.
"The rest of the global market will carry on."

http://news.sky.com/story/warning-to-brussels-over-stripping-city-of-euro-clearing-10888828

steampowered

A_Medium_Size_Jock wrote: »

Meanwhile global insurers have requested that the EU continue mutual access with the UK post-Brexit

...

Just as with clearing (see below) and the possible negative consequences for the EU as well as the UK, should the EU persist it will appear globally to be no more than an act of attrition for leaving the EU since neither party would benefit.

I'm not sure everyone will appreciate the consequences of what you are suggesting.

The current arrangement is that financial services companies can be regulated in one European country (usually the UK), and that licence/regulation enables them to operate across Europe.

If financial services companies like insurers were to retain full access to the EU from the UK, that would mean the UK needs to implement and comply with EU financial services regulation.

ERICS_MUM

I've thought for a while that if only the EU would allow the UK to 'contract out' of the free movement of labour (i.e. Anyone can move anywhere), we could stay put in the EU.

Is this a ridiculous thought ?

A_Medium_Size_Jock

steampowered wrote: »

I'm not sure everyone will appreciate the consequences of what you are suggesting.

The current arrangement is that financial services companies can be regulated in one European country (usually the UK), and that licence/regulation enables them to operate across Europe.

If financial services companies like insurers were to retain full access to the EU from the UK, that would mean the UK needs to implement and comply with EU financial services regulation.

As it already does, you mean?
That is I think their point.
Methinks you're reading too deep - this has been aimed at the EU, not the UK. These global organisations are not asking the UK to retain EU membership, despite the hopes of some.

A_Medium_Size_Jock

ERICS_MUM wrote: »

I've thought for a while that if only the EU would allow the UK to 'contract out' of the free movement of labour (i.e. Anyone can move anywhere), we could stay put in the EU.

Is this a ridiculous thought ?

It is as far as both the EU and the UK is concerned, so far certainly.
Also it goes against the referendum which asked simply whether to leave or remain in the EU.
The result was to leave the EU, not to remain.

Thrugelmir

ERICS_MUM wrote: »

I've thought for a while that if only the EU would allow the UK to 'contract out' of the free movement of labour (i.e. Anyone can move anywhere), we could stay put in the EU.

Is this a ridiculous thought ?

Yes it is. At it's heart the EU is a political project foremost. Free Movement is one of the four core principles.