Bank of England warns banks to have a Plan B for Brexit aftermath …and a Plan C and a Plan D…
UK banks need to prepare for a wide range of potential outcomes and avoid sudden changes to lending as the country gets ready to leave the European Union, the Bank of England said.
It said that UK banks will have to provide copies of contingency plans to reassure regulators that they are ready for “a range of possible outcomes”.
The Bank of England’s Financial Policy Committee is asking Britain’s banks to show how they can avoid their continental customers being abruptly cut off after Brexit. Many lenders are worried that Britain will no longer have unrestricted access to the EU single market.
Some are looking at locating in Dublin, Luxembourg, Frankfurt and other financial service friendly EU locations.
HSBC, UBS and Morgan Stanley have decided to move about 1,000 staff each from London in the next two years. Last week Goldman Sachs said it would begin moving hundreds of people out of London as part of contingency plans for Britain leaving the EU.
“Sudden adjustment could disrupt the provision of market liquidity and investment banking services,” the Bank of England Financial Policy Committee said in its quarterly policy statement this week, just a couple of days before Prime Minister Theresa May was due to ‘trigger’ Article 50 and formally begin the UK’s divorce from the EU.
Bank of England Governor Mark Carney said earlier this year that he did not believe leaving the European Union was the biggest threat to British financial stability. The Bank of England said it was launching a review into consumer lending standards, which it now believes poses a greater risk than buy-to-let lending to small landlords.
In January, Mark Carney said that Britain’s large financial sector could survive some businesses moving away, but losing key activities could cause it to collapse like a precarious wooden tower in the game Jenga.