Brexit May Not Be Bad For UK Banking Sector, Says Regulator

Josh O'Neill Assistant Editor 28 September 2017

Brexit May Not Be Bad For UK Banking Sector, Says Regulator

It appears that the UK's decision to exit the European Union may not be as bad as it was once thought for the country's banking and financial services sector.

A UK regulator anticipates that 130 European financial institutions will apply for licences to operate in the UK after Brexit, easing concerns that its divorce from the European Union jeopardises its reputation as a global finance hub. 

Sam Woods, chief executive of the Prudential Regulatory Authority (PRA) and a deputy governor at the Bank of England, warned that it would be “unwise” for companies to rely on a transitional agreement between the UK and the EU.

“I think we are likely to see at least 130 applications to be authorised here in the UK,” he told Reuters at its Financial Regulation Summit in London. 

The PRA has yet to decide, however, whether UK units of European firms will have to convert to subsidiaries, which would bring them into the scope of the regulator. 

Woods said that he was likely to make that decision within the next few months, but noted that this timeline could change if the UK strikes a transitional deal with the bloc. 

The PRA’s forecast comes at a time when the UK’s wealth and asset management sectors are fretting over Brexit, as the country’s decision to leave the EU could rid it of its current passporting rights, which allow firms to freely offer their services across member states. 

Several big banks have already penned plans to move some of their operations to, or set up new shops in, locations such as Dublin and Frankfurt to continue serving European clients, regardless of how the Brexit deal takes shape. 

Last week, UK Prime Minister Theresa May offered to continue paying into the EU during a two-year transition period once the UK departs in 2019. Under this proposal, the UK and the EU would continue to enjoy access to each other’s markets.

Woods said that inbound firms – those based in the EU and seeking to operate in the UK – have been slower in their preparations for Brexit, whereas outbound institutions aiming to do vice versa have moved quicker. 

“We are having to push the inbounds to move on with their thinking,” he said.

Register for WealthBriefing today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes