March 28, 2018 / 12:26 PM / in 4 months

Bank of England reassures finance companies on Brexit transition deal

LONDON (Reuters) - The Bank of England said on Wednesday finance companies operating in Britain will have more time to meet a Brexit deadline, in a move aimed at avoiding a potentially disorderly shift of people and operations across the continent.

FILE PHOTO: A statue is silhouetted against the Bank of England in the City of London, Britain, December 12, 2017. REUTERS/Clodagh Kilcoyne/File Photo

Britain and the European Union last week agreed a transition period of 21 months that will follow Britain’s departure from the bloc in March 2019 during which companies will have unchanged access to the bloc’s markets.

Many banks have said they will not be able to rely on such a political deal as it will not be formally ratified by governments until the autumn and any deal could collapse if there is domestic political upheaval in the months before Britain leaves.

The Canary Wharf financial district is seen from Greenwich Park in London, Britain, January 22, 2017. REUTERS/Hannah McKay

In a letter to banks, the BoE sought to reassure companies that they can rely on the transition period to ease their adjustment to Brexit.

Companies will be able “to plan that they will be able to continue undertaking these activities during the implementation period in much the same way as now,” the BoE said.

It remains to be seen if European financial regulators will say that British banks that do business in the bloc can use the transition deal to take more time to get clearance for their operations in the EU.

Stephen Jones, the chief executive of UK Finance, the trade association for banks and finance firms in Britain, said EU regulators must provide similar reassurance.

“Without similar assurances from EU regulators, UK-based firms serving customers in the EU will be forced to continue implementing costly contingency plans,” he said.

Currently, banks such as Germany’s Deutsche Bank (DBKGn.DE) and France’s BNP Paribas (BNPP.PA) and Societe Generale (SOGN.PA) operate in Britain under EU ‘passporting’ rules which are due to expire when Britain leaves the bloc.

The BoE said the government has committed to introduce legislation to allow firms to continue their activities for a limited period after leaving the EU.

In the unlikely event that the withdrawal deal is not ratified this will provide a back-stop for companies to continue their operations, the BoE said.

Earlier this month, Britain’s finance minister Philip Hammond said once the transition was agreed regulators should tell companies they can rely upon it.

Reporting By Andrew MacAskill and Alistair Smout; editing by Stephen Addison and Richard Balmforth

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