Payment providers in the U.K. are not fully prepared for the chance of a no-deal Brexit, warned the European Banking Authority late last week.
According to a report in Reuters citing the European Union’s watchdog for the payments industry, the regulator said in its Risk Assessment Report, which it releases each year, that it was worried that the smaller and less sophisticated payment companies don’t have plans in place to deal with a no-deal Brexit. The regulator said the lack of contingency plans from payment and e-money firms is particularity worrisome. “The latter are of particular importance from an EU27 perspective, because of the large volumes of payments business being offered by U.K.-based institutions through their cross-border passporting activities,” the EBA report said, according to Reuters. In order to continue serving customers in the U.K., the payment firms would have to open new operations in the EU by March. Many banks and insurance firms have already opened new hubs, noted the report. “For such institutions, contingency planning, including relocation, where appropriate, is needed, and effective communication with customers ex-ante to prepare for any disruption is vital,” the report said, noted Reuters.
The European Banking Authority isn’t the only one painting a dire picture if there is a no-Brexit deal. Late last month Frankfurt Main Finance, the lobbying group, warned London alone could lose as much as €800bn (£700bn) in assets to Frankfurt. That could come by March as financial services companies begin moving their headquarters to Germany and out of London. According to the lobbying group, 30 banks and financial companies confirmed they chose Frankfurt for the city for their new EU headquarters and seven more should follow suit. That, warned Frankfurt Main Finance at the time, will result in billions of pounds worth of assets leaving the U.K, in the first half of next year. “All in all, we expect a transfer of €750bn to €800bn in assets from London to Frankfurt, the majority of which will be transferred in the first quarter of 2019,” said Hubertus Väth, the managing director of Frankfurt Main Finance.