The Bank of England will allow European banks to continue operating without creating expensive subsidiaries after Brexit, the BBC reported, the opening gambit in a tussle with the EU over London’s position as a top global financial hub.
The BoE’s decision, if confirmed, would mean European banks offering wholesale services would not face new hurdles to operating in London after Britain leaves the European Union in March 2019.
A BoE spokesman declined to comment on the report ahead of the publication at 1300 GMT of the central bank’s approach to future supervision of foreign banks, insurers and clearing houses.
By allowing EU banks to function as normal, the BoE’s announcement represents the first salvo in an expected struggle with the EU over banking rules that will decide the fate of London’s lucrative financial centre for decades to come.
The central bank’s proposal indicates a much softer British position than that of the EU, which insists London-based banks will lose access to EU banking markets after Brexit and wants to pull some key banking business back.
London vies with New York for the title of the world’s financial capital, dominates the $5.1-trillion-a-day global foreign exchange market and is home to more banks than any other centre.
But many other EU capitals see London’s Brexit tumult as an opportunity to grab new business.
Countries such as France, Germany and Ireland are wooing banks based in London to move operations to them after Brexit.
Earlier this year, BoE Governor Mark Carney called for Britain and the EU to recognise each others’ bank rules after Brexit, or risk a potentially damaging hit to financial services across Europe where many companies depend on London for funding.
The EU’s top Brexit negotiator Michel Barnier this week reiterated his stance that London stands to lose access to the EU banking market if it sticks to its plan to impose new controls on migration, one of the conditions for membership of the single market.
The EU has already proposed that clearing of euro-denominated derivatives, which are done mainly in London, could move to the euro zone after Brexit, if there is no comprehensive Brexit deal between EU and UK regulators.
The tough EU line on banking is extremely sensitive for the United Kingdom which collects over 70 billion pounds ($94 billion) a year in tax from the financial services sector. So far, British Prime Minister Theresa May has largely conceded to the EU on the structure, timetable and substance of the negotiations.—Agencies