Due to Brexit, European banks could be forced to inject between 30 and 40 billion euros into their British branches. This is what the Boston Consulting Group claims in a report taken up by the Financial Times.
Analysts also say that the UK's exit from the EU is likely to trigger an 8-22% increase in banks' financial transaction costs annually, which could lead many institutions to divest some assets in the UK. UK. But why is the fate of foreign banks within Britain so uncertain? The main reason is that, with Brexit, financial institutions could lose the ability to operate from London across the EU with a single licence.
So far most of theattention has focused on US banks, who have chosen en masse to establish their European headquarters right in the British capital. The analysis of the Boston Consulting Group, however, is centered on around 60 European banks that have branches in the UK, including giants like Deutsche Bank, Commerzbank, Bnp Paribas, Banco Santander and Société Générale.
"The consequences will be heavier for European banks than for US ones – explains Philippe Morel, one of the authors of the report – Europe is not vital for US banks, which generate around 20-30% of their financial profits here. For European institutions, however, the scenario is very different: some even carry out 70% of their financial operations in London".
Today the rules do not require to provide the London branches with capital distinct from that of the continental parent company, but this situation could change after Brexit. With the UK out of the European single market, branches of EU institutions will no longer be able to use their home country licenses to operate in Britain.
According to the Boston Consulting Group, it is "probable" that at least some banks will decide to create intermediate holding companies in the UK similar to those already present in the USA. At that point, "both the UK and the EU will demand that these subsidiaries (especially in the case of major institutions) are well capitalized – continues the study –, exactly as happens in the United States”.
The report suggests that the overall bill for the European banking system in terms of capital would fluctuate between 30 and 40 billion euros, of which 10 for German banks alone. And Morel points out that most of these costs would fall on the 10 largest institutions.
In general terms, the BCG believes City is at risk of losing up to 50-70% of its financial assets And that iIn the future, banks may have to manage their UK and European assets separately, thereby doubling costs.
However, "some institutions could also take advantage of the situation - concludes the report - by reorganizing their operating model and significantly reducing costs".
