The BoE plans to announce rules where EU banks operating through branches will be able to continue to do so without creating expensive subsidiaries, the BBC has reported.
These branches allow banks to move money internationally in an easy way but at present, in the event of a financial crisis, they face the risk of funds being repatriated to the foreign bank’s headquarters. This is likely to leave customers of the UK branch out of pocket.
According to the BBC, the cost of changing from a branch to a subsidiary could be in the billions for a bank such as Deutsche, which employs 9,000 individuals in the UK.
Meanwhile, subsidiaries are required to hold their own capital as they fundamentally become UK companies.
Government sources told the BBC that there are three reasons as to why BoE is making this decision. Jobs are one factor as tens of thousands of people are paid to work in the London branches of EU banks.
The second is that these individuals also account for a large amount of taxes paid to the exchequer. The third reason listed is that these services sold by the UK branch of EU banks to countries such as the US for example, count as UK exports – something the government is keen to maximise.
