The European Banking Authority (EBA) told European banks on Monday (Dec. 17) to prepare for Brexit and the possible sudden withdrawal of Britain from the European Union, according to a report from Reuters.
The EBA is concerned about not only financial stability, but the preparation of smaller institutions for the potential Britain departure.
The organization, which is a regulatory agency of the EU and headquartered in London, told banks to prepare contingency plants and educate their customers on how the Brexit situation would affect them.
The statement from the EBA arrives as Britain is mired in a governmental standoff about the issue. The outcome can go a few ways – either with a sudden, messy departure with no deal or another referendum on EU membership.
“The EBA is ... calling on all financial institutions affected .... to engage with their customers and provide adequate information on the risks and mitigating measures being taken,” one regulator said.
Some places, like London and Brussels, have begun planning for a no-deal Brexit. A senior British minister, who spoke to Reuters anonymously, said the threat of a no-deal exit was rising by the day. The minister also said there was no secondary plan for Prime Minister Theresa May’s deal, which attempts to keep close trading relationships with the EU.
The idea of a Brexit without a deal is a troublesome scenario for many big businesses, as Britain is the world’s fifth largest economy. A no-deal exit would mean a lack of a transition period and an abrupt departure from the Union.
Since Britain is a member of the World Trade Organization, tariffs and other trade terms would now be under that organization’s rules.
Some business leaders are afraid that the new border after Brexit could have debilitating effects on ports, trade and supply chains around the world.
As for banking, the EBA released a statement saying that bank customers who are anxious about Brexit should contact banks themselves if they don’t hear anything by the end of the year.