LONDON (Reuters) - The Bank of England expects 130 financial firms from across Europe to apply for licences to continue operating in Britain after Brexit, its Deputy Governor Sam Woods said.
As head of the Prudential Regulation Authority, Woods said that he will also have to decide by Christmas if branches of European Union financial firms in London must convert to subsidiaries and be directly supervised by the PRA.
Woods had more than 400 responses to his call for banks to spell out their plans if Britain leaves the EU in March 2019 without new trading arrangements or a transition deal in place.
Of these, the “outbounds” or UK based banks who want to maintain links with customers elsewhere in the EU, are more advanced in their thinking than the “inbounds”, or banks based elsewhere in the EU who want to continue serving UK customers.
“We are having to push the inbounds to move on with their thinking,” Woods told the Reuters Financial Regulation Summit.
“We are likely to see at least 130 applications to be authorised here in the UK. It’s (a) significant stretch, but I think we can do that,” Woods added on Tuesday.
Woods said earlier this year that branches of EU banks in London might have to apply to become subsidiaries, a costly exercise that involves building up capital and reserves locally.
Branches rely on capital held by their parent and are mainly supervised by their home regulator.
Woods said on Tuesday he has two or three months left before deciding on branch conversions - barring news in coming weeks of a transition deal agreed by the EU as well as Britain.
“Broadly, come Christmas time, we will need to move into a different mode of receiving applications,” Woods said.
It would be “unwise” to rely on a transition agreement happening until there was some sense that the EU was also in favour of one, he said.
Woods expects London will continue to be one of the world’s largest financial centres in the coming decades after some politicians and economists predicted the City will lose its pre-eminent status as a global hub for finance because of Brexit.
He agreed with the findings of a Reuters survey published last week that around 10,000 finance jobs will be shifted out of Britain or created overseas in the next few years in the initial wave, if the UK is denied access to Europe’s single market.
“Your survey seemed to be about right,” he said. “The numbers I have are possibly slightly lower, but in that space.”
However, he said bigger moves could be in store in the future depending on the outcome of the negotiations and how finance companies adapt to building out operations overseas.
Woods said any new trading relationship with Europe would likely avoid Britain being a “rule taker” or having to copy the bloc’s rules into UK law as a basis for retaining market access.
“It would be very unwise for us to run a major financial centre without any say over the rules,” he said, adding that there will also be no attempts to deregulate either.
Woods also said that British banks are on course to introduce new rules designed to protect their domestic retail customers from riskier parts of their operations by 2019.
Some large banks have been lobbying for more time, saying Brexit has made the separation more complex and costly.
Woods said at the moment banks were at a “peak” of implementing the new rules, adding it was “hard surgery” for them but that it was “so far, so good”.
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Reporting by Rachel Armstrong, Huw Jones and Andrew MacAskill; editing by Jane Merriman and Alexander Smith
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