- Second joint report from the Association of Foreign Banks and Norton Rose Fulbright revisits the foreign banking sector’s sentiment on Brexit
- With less than 200 days until the UK’s departure from the EU, foreign banks operating in the UK comment on the lack of certainty over a post-Brexit regulatory framework
- Banks also express their views on recruitment challenges following the Brexit vote
- Respondents sought clarity as to when the transition agreement would be placed on a statutory basis
- Foreign banks also commented on the importance to their business of London remaining a major international financial centre
The Association of Foreign Banks (AFB), in conjunction with global firm Norton Rose Fulbright, has launched its second report on the impact of Brexit on the foreign banking sector in the UK.
A wide cross-section of AFB members, including senior executives from nearly 60 foreign banks, responded to a survey as part of the joint Brexit report which focuses on three headline areas:
- The UK’s post-Brexit relationship with the EU
- The immigration impact on staff
- Business confidence in the UK
The report also explores the future of banks’ global booking models, the cost of preparing for Brexit, and banks’ engagement with regulators on Brexit.
The report is further split into three sections to reflect AFB structures:
- UK branches of EU banks
- UK branches of non-EU banks
- UK incorporated subsidiaries of foreign banking groups
The lack of certainty over the post-Brexit regulatory framework between the UK and EU is a major concern. The deep interconnectedness of the UK’s and EU27’s financial markets mean that a robust and comprehensive passport alternative is widely sought by the foreign banks. However, many respondents felt the current EU equivalence framework would not be an appropriate basis on which foreign banks’ UK operations should be based. Likewise, banks want to ensure that cross-border financial contracts are serviceable post-Brexit.
Banks also highlighted challenges concerning their ability to recruit and retain staff in view of the lack of clarity around the post-Brexit UK immigration system.
John Treadwell, Chief Executive Officer of the Association of Foreign Banks, commented: “Although foreign banks have expressed their continuing support for London as a location for business and as a major international financial centre, they have stated their desire for the clarity necessary to determine how they carry out their business going forward. Whilst there were some concerns regarding recruitment challenges as a result of the Brexit vote, the majority have not experienced any difficulty in this regard; however, some banks continue to face recruitment challenges as a result of other issues, e.g. Tier 2 visas over-subscription.”
Charlotte Henry, a financial services partner at Norton Rose Fulbright, commented: “Whilst most major financial institutions have well advanced Brexit contingency plans, many express concerns over the lack of clarity over what will replace the existing UK-EU regulatory passport. Brexit has already had a disruptive impact on banks, many of whom are making changes to their operating models. It remains to be seen whether banks make more profound changes to their booking model strategies in response to the final post-Brexit UK-EU regulatory framework.”