As Brexit looms ever closer, Reuters reports, the departure of Britain from the European Union (EU) means that British companies may find it tough to get loans from European banks.
The newswire said on Tuesday that banks based on the Continent are responsible for about 10 percent of lending to British firms.
That estimate comes from the Bank of England’s (BOE) Financial Policy Committee (FPC), which offered up that number late last month at a meeting.
Reuters noted that banks doing the aforementioned lending are currently operating as branches but may have to seek what Reuters termed an “upgrade to fully fledged subsidiaries” after the real exit.
That process could be time-consuming across several months. In a statement, the policy committee said that “the risk of disruption to wholesale U.K. banking services appeared to be slightly higher than previously thought, given that a number of EEA (European Economic Area) firms branching into the U.K. were not sufficiently focused on addressing this issue.”
As for branches becoming subsidiaries, the Prudential Regulation Authority (PRA) has said that as many as 130 license applications could be coming from branches beginning in the first quarter of 2018.
In addition to a lending pullback following Brexit, clearing house activity may have to be re-entrenched in locales other than London, according to the BOE. Draft-level versions of law from the EU mandate such shifts.
FPC statements included the claim of “substantial risk” to cross-border clearing activities tied to financial instruments such as derivatives. Clearing houses have been formulating contingency plans that would, in some cases, relocate activity away from the U.K. in order to continue serving clients in the European Union’s economy.