LONDON (Reuters) - The political turmoil surrounding Britain’s departure from the European Union threatens Royal Bank of Scotland’s ability to clear more than 50 billion euros ($56 billion) per day in cross-border payments, the bank said on Friday.
RBS said it expected to be granted licenses to be able to continue clearing the payments via its Frankfurt branch in time for Britain’s departure on March 29, but it risked a significant hit if that did not happen.
“Given the quantum of affected payments and lack of short-term contingency arrangements, in the event that such euro clearing capabilities were not in place in time for a Hard Brexit or as required in the future, it could have a material impact on the Group and its customers,” the bank said.
Hard Brexit refers to Britain potentially leaving the EU without a withdrawal deal. The disclosure from RBS is one of the most detailed yet from a bank on the ways in which the British government’s failure to secure such a deal is threatening a hit to the financial industry.
Prime Minister Theresa May suffered a further defeat on her Brexit strategy on Thursday night, undermining her pledge to EU leaders to get a divorce deal approved if they grant her concessions.
If the deal is not passed in time for March 29, Britain risks crashing out of the bloc without the unrestricted access to its financial markets that have helped make London the continent’s leading financial hub.
RBS said the ability to clear cross-border euro payments was also critical for its ability to manage euro-denominated central bank cash balances of around 23 billion euros.
RBS warned Brexit could hurt its ability to reduce costs this year, as the bank reported a better than expected profit for 2018.
Reporting by Lawrence White and Rachel Armstrong; Editing by Mark Potter