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Bank of England will allow EU banks to operate as normal after Brexit Bank of England will allow EU banks to operate as normal after Brexit
(about 1 hour later)
The Bank of England will allow European banks to continue selling their services in the UK without having to create expensive subsidiaries after Brexit, even if no divorce deal is struck between London and Brussels, the BBC reported. The Bank of England has proposed new plans that will allow European banks to continue operating under existing rules in the UK post-Brexit.
The decision, due to be made public by the BoE at 1.00pm on Wednesday, would mean European banks offering wholesale services would not face new hurdles to operating in London, which vies with New York for the title of the world’s financial capital. This means that EU banks will be able to continue operating through branches in the UK and will not have to create costly subsidiaries.
The BoE did not immediately respond to repeated requests for comment out of business hours. The Bank said that it made the decision based on the assumption that a "high degree of supervisory cooperation with the EU continues” once the UK leaves the bloc.
The BBC quoted unidentified government and industry sources as saying they supported the decision. There are currently 77 branches of banks operating in London that are branches of lenders headquartered elsewhere in the EU.
If confirmed, the BoE’s proposal would amount to a signal of goodwill by Britain in Brexit talks and an attempt to preserve London’s position as the financial centre which hosts more banks than any other. These banks operate in Britain under EU “passporting” rules which will expire when Britain leaves the union in March 2019.
  A subsidiary bank is a local branch of a bank based in another country which has to follow the host country’s central bank regulations.
More than 100 banks operating in London are branches of lenders headquartered elsewhere in the EU. Currently, they operate in Britain under EU “passporting” rules which are due to expire when Britain leaves the bloc in March 2019. Setting up a subsidiary involves building up capital buffer reserves in case of a market crash and changing could cost banks millions.
  There are fears that if European banks such as Deutsche Bank and BNP Paribas are forced convert their branches to subsidiaries they could choose to relocate elsewhere.
The BoE has previously said it would let banks know before the end of the year whether any or all of these branches must reapply for branch licenses to operate after Brexit, or become subsidiaries, a costlier option for banks. The EU’s chief Brexit negotiator Michel Barnier said in November that when the UK leaves the single market financial services firms based in Britain will lose their passporting rights.
Switching from being a branch to a subsidiary means having to build up buffers of capital and cash locally. “On financial services, UK voices suggest that Brexit does not mean Brexit. Brexit means Brexit, everywhere,” Mr Barnier told the Centre for European Reform.
British Prime Minister Theresa May has said Britain will leave the EU’s single market, raising questions about how companies in Britain will do business in the bloc after Brexit, and how European companies can operate in Britain. Catherine McGuinness, policy chairman at the City of London Corporation, said the decision by the Bank “was a welcome bit of news” at the end of the year for the City.
Reuters “EU banks are a significant element of the 1.1 million jobs and £72bn that the financial services sector generates in tax revenues each year. They are also one of the many elements, along with our openness and attractiveness to international business, that make us such an attractive global financial centre,” she said.
“This development would provide greater certainty that businesses always crave. We are pleased to see this development and it is now up to our politicians and regulators to make sure this is delivered,” she added.