European banks
are privately warning they will have to shift thousands of people out of
Britain if Brexit negotiations push the Bank of England to demand that
they reinforce London operations with fresh capital, executives have
told Reuters.
These
capital demands, which could amount to an estimated 40 billion euros
($43.73 billion), threaten to accelerate an exodus of bankers from the
City of London that has been triggered by Britain's vote to leave the
European Union.
Three big European banks - Deustche Bank (DBKGn.DE), BNP Paribas (BNPP.PA) and Societe Generale (SOGN.PA) - currently operate some of their sizeable activities in Britain through a branch structure, which requires lower capital requirements.
British regulators have been comfortable with this situation with Britain as part of the EU, but once Britain leaves they will want these banks have enough capital to support their business and ensure that British taxpayers are not left footing the bill in a crisis.
The regulators have said European banks should be ready to set up full-blown subsidiaries in Britain and submit to Bank of England regulation if Britain and the EU cannot reach a Brexit deal. A report from Boston Consulting has estimated the switch to a full subsidiary structure could cost European banks around 40 billion euros in extra capital.
Several European banks base the bulk of their investment banking activities, such as sales and trading, in London, which Bank of England Governor Mark Carney has dubbed the "investment banker of Europe."
Deutsche Bank has 9,000 staff based in Britain, BNP Paribas has around 6,500 staff in the country, where it bases the bulk of its investment banking business and Societe Generale has some 4,000 staff in Britain.
U.S. banks have until now been at the center of speculation about the impact of Brexit. Many of them have already warned of the need to potentially move thousands of staff out of London to maintain EU access after Britain leaves the EU.
EU passports enable banks to operate throughout the bloc but be regulated mainly by just one member country. But passporting between the rest of the EU and Britain may be lost once Britain leaves EU in two years' time.
Three big European banks - Deustche Bank (DBKGn.DE), BNP Paribas (BNPP.PA) and Societe Generale (SOGN.PA) - currently operate some of their sizeable activities in Britain through a branch structure, which requires lower capital requirements.
British regulators have been comfortable with this situation with Britain as part of the EU, but once Britain leaves they will want these banks have enough capital to support their business and ensure that British taxpayers are not left footing the bill in a crisis.
The regulators have said European banks should be ready to set up full-blown subsidiaries in Britain and submit to Bank of England regulation if Britain and the EU cannot reach a Brexit deal. A report from Boston Consulting has estimated the switch to a full subsidiary structure could cost European banks around 40 billion euros in extra capital.
Several European banks base the bulk of their investment banking activities, such as sales and trading, in London, which Bank of England Governor Mark Carney has dubbed the "investment banker of Europe."
Deutsche Bank has 9,000 staff based in Britain, BNP Paribas has around 6,500 staff in the country, where it bases the bulk of its investment banking business and Societe Generale has some 4,000 staff in Britain.
U.S. banks have until now been at the center of speculation about the impact of Brexit. Many of them have already warned of the need to potentially move thousands of staff out of London to maintain EU access after Britain leaves the EU.
EU passports enable banks to operate throughout the bloc but be regulated mainly by just one member country. But passporting between the rest of the EU and Britain may be lost once Britain leaves EU in two years' time.
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