Jon Holt, Incoming Head of Financial Services, KPMG UK shares his insights on banks’ responses to the PRA’s request for Brexit business plans:
“Most of the plans landing in the regulator’s inbox are an outline of options rather than a concrete course of action but, from our discussions, there are two messages coming through loud and clear: an answer on whether there will be a transitionary arrangement is needed before year-end, and for some banks, especially the smaller ones, it simply doesn’t make sense to split their balance sheet in two.
“The finance sector has been calling for a transitionary period but we still have no confirmation and we’re reaching make-or-break point. If there is no agreement with the EU to extend the status-quo for several years past March 2019, firms need to take action or face a cliff-edge. In some cases getting a licence to operate overseas is taking teams of around 40 people almost five months. With that in mind, the application process will have to start in the first half of 2018 which means decisions need to be made by the end of 2017. If we reach December without certainty on this, I expect to see a lot of companies pushing the button on relocation.
“Several European regulators and the ECB have made it clear that relocation means moving capital; yet for all banks balance sheet optimisation is a challenge right now so splitting that balance sheet between multiple jurisdictions will come at a heavy cost. There seems to be a general assumption that financial services companies can afford Brexit, but the truth is for some it’s simply too expensive and these plans will likely make the PRA keenly aware of that.”
Notes to editor
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