(MENAFN- Gulf Times) The Bank of England said yesterday it planned to spare European banks costly extra capital rules once Britain left the EU, but warned of 'consequences if Brexit talks turned sour.
Setting out its position for a tussle with Brussels over London's status as a global financial hub, the BoE said keeping Britain open to foreign banks after Brexit was key for economic growth at home and beyond.
Bank of England governor Mark Carney said big European banks operating in Britain would face little change, as long as their supervisors in the European Union cooperated with London after Brexit.
'But we retain all our options and if that is not forthcoming there will be consequences for those institutions, he told lawmakers shortly after the BoE plan was published. Deputy governor Sam Woods said cooperation had worked well to date. 'However Brexit is throwing up a point of tension which I think will probably build rather than subside.
The BoE's announcement, which was backed by Britain's finance ministry, was a first salvo in an expected struggle with the EU over banking rules that will decide the long-term fate of London's lucrative financial centre. Prime Minister Theresa May has said Brexit will entail leaving the EU's single market, raising questions about how British companies will do business in the bloc and European ones in Britain.
A bitter British divorce from the EU would make cross-border supervisory cooperation harder and potentially hurt banks with a big London presence, such as Germany's Deutsche Bank. The BoE said it would allow larger banks for example, with assets of more than £15bn ($20bn) in Britain to operate as branches in the UK only if their home supervisors agreed to cooperate more closely with the BoE.
Otherwise, they would be classed as subsidiaries, which would require them to park costly extra capital in Britain.
There are 77 branches of banks from the European Economic Area in Britain 23 of which have assets of around or above £15bn plus 80 branches of insurers.
The BoE's proposal indicated a softer British position than that of the EU.
It has so far insisted that London-based banks will lose their free access to EU banking markets if Britain sticks to its plan to impose new controls on migration, which is popular with British voters but would breach one of the conditions for membership of the single market.
But Carney said the two sides had a lot in common and sounded upbeat about prospects of a deal.
'I don't accept the argument that just because it hasn't been done in the past it can't be done in the future, he said.
London vies with New York for the title of the world's financial capital.
It dominates the $5.1tn-a-day global foreign exchange market and is home to more banks than any other centre.
But many other EU capitals see Brexit as an opportunity to grab new business.
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