The BBC understands that Banks that provide wholesale financing – money and services for businesses and others – will operate under current rules.
Even with “no deal”, the bank will announce it later on Wednesday.
This means that eu Banks operating through branches can continue to operate without the need to build subsidiaries – an expensive process
The difference between a branch and a subsidiary is something that we all might want to ignore, but it’s important – so please bear with me.
Branches for bank transfer funds in international business provides a simple way, but in the event of financial crisis, may be will soon be the headquarters of repatriation of foreign Banks, empty so that the British branch of the customer.
The subsidiaries were forced to own their own cushioning capital, which could not be cut and run – they were essentially British companies.
Moving from a branch to a subsidiary, for example, could cost billions of dollars, such as deutsche bank, which employs 9,000 people in Britain.
Currently, Banks located anywhere in the eu can use the known financial services passport to sell services to other parts of the eu.
On Monday, Michel Barnier, the eu’s chief negotiator, was talking about the difficulty of UK financial services entering the European single market after brexit.
“There is no place [financial services], no single financial services trade agreement, it doesn’t exist, they lose the passport of financial services when they leave the single market,” he said.
This raises the question – if they are playing hardcore – why are we doing so well on the red carpet?
Mr Miles Celic, head of the UK gaming group TheCityUK, said it was good faith to provide continuity to eu Banks, but it was also one of enlightened self-interest.
“Encouraging eu Banks to continue their operations in the UK will help safeguard financial stability in the UK and the eu and help defend London’s position as an open global financial centre,” he said.
Forcing the eu’s banking arm in Britain to become a separate capitalised subsidiary might encourage European Banks to withdraw from London – undermining its status as a financial centre.
On the other hand, London, the European Union’s wholesale bank, is prized for its expertise and capital. Some might argue that the decision was a trump card that should have been prevented from making tough negotiations.
So why would we allow the eu to get this valuable resource, while the eu could create obstacles in another way?
Government sources say there are three reasons.
First, there is work. Thousands of high-income people work in the London branch of the eu’s big Banks. It also creates pressure on other industries, such as accounting and law.
Second, those people pay a lot of taxes for the Treasury.
There are no strings attached
Third, there is an important economic problem. For example, the British branches of French or German Banks are sold to a third country like the United States, which is the UK’s export product, which the government is keen to maximize.
In a speech in October, prudential supervision bureau (regulatory bank of the bank of England) Sam Woods said, the European financial market functioning because is not just a “passport”, Michel barnier insist on will be dropped.
He said he hoped “there is a strong partnership for wholesale Banks to continue operating in the UK and 27 branches of the eu… We have embedded a complex regulatory framework… There are good reasons to think that these will continue into the future.”
The sentiment echoes what a senior banker told me six months ago: “if the supervisor is the head, not the politician, then within two weeks you can solve the problem.”
They’re not responsible. But I know that Banks have the blessing of the government to provide this “no new post-brexit conditions” into the world’s largest financial centre.