Brexit’s Threat To UK’s Retail Banking

According to a new confidential industry report, the consumer side of British banking could soon find itself hard hit by the Brexit.

Though it’s gotten somewhat less airtime that the hit coming for the larger and more lucrative investment banking, a new 117-page report from the British Bankers’ Association strongly indicates that such common place areas as lending, savings and payments could all be affected as well.

Britain’s Barclaycard, for example, issues 73 percent of all cards across the EU — the effects would be far-reaching if the fees for its use at business and ATMs shoot up across the EU. Also problematic for London will be continued access for the single labor market, since immigration concerns were central to the Brexit debate. The BBA report — composed by the law firm Clifford Chance and Global Counsel, the advisory firm set up by the Labour grandee Lord Mandelson, has of yet not been made fully available to the public.

But according to the Financial Times, the report states that Britain’s banks made £1.1 trillion ($1.4 trillion) in loans to the EU and exported £20bn ($25 trillion) in financial services to the bloc. It further notes that English customers may be facing a world of payments hassles in the EU since Britain will be leaving payment arrangements like the Single Euro Payments Area.

To head off some of the worst outcomes, the BBA suggests government officials negotiate new market access arrangements in a bilateral agreement with the EU. It further recommends a focus on interchange fees — noting that the UK will no longer be party to the bloc’s Interchange Fees Regulation (IFR), which limits the charges for merchants accepting credit or debit cards and prevents retailers from discriminating against regulated cards.

“U.K. card service providers may find it difficult to maintain their existing position in the U.K.,” it warns, adding: “U.K.-issued cards may be less accepted in the EU27 since they will incur higher costs for retailers.”

Private banking “will be particularly badly affected,” the report warns — which is rough, since U.K.’s private banking industry is second only to Switzerland by size of assets under management and administration.

“There will be some countries in which it will be in practice impossible for U.K. private banks to offer their services,” the report reads.