Euro banks set for capital bill of up to €40bn due to Brexit
London subsidiaries may need to be separately funded according to report
- Boston Consulting Group publish report into effect on EU banks in aftermath of vote
- Britons voted to leave the European bloc after a shock referendum result last month
Updated : 09:24
Much of the focus of the aftermath of Britain's vote to leave the European Union has been on the impact on US banks that use London as a European gateway, but the Boston Consulting Group has published a report outlining the damage done to European banks.
Banks in European nations could be forced to fork out as much as between €30bn and €40bn in order to save their UK editions, after the fallout from the referendum, according to the report.
Foreign banks’ London operations have been thrown into turmoil by the UK’s Leave vote, since they could lose the “passports” that enable them to do business across the entire 28-country bloc if they are licensed in one.
The report focuses on 60 banks located in Europe, including Deutsche Bank, BNP Paribas, Santander and Société Générale.
The report focuses on 60 banks located in Europe
“Europe is not that important to the US banks, it’s 20-30 per cent of their capital markets’ profit,” author Philippe Morel said. “For European banks it’s much more important, those banks could be doing 70 per cent of their operations in London.”
“Everyone is talking about the US banks’ perspective, but the European banks are going to be more impacted,” said Morel.
BCG said it was likely that the banks would set up a type of "international holding company" favoured by lenders in the US.
The report highlightesd that London would lose at least some of the European capital markets business that runs through the city, which makes up between 50 and 70 per cent of the city’s capital market activity.
“Clearly, the ability of banks to centre their operations and maintain scale in a single, well-capitalised London entity is now uncertain,” the report said. “The additional benefits of liquid, robust markets and access to talent as well as clients may be eroded.”
Perhaps the only option for some banks, according to BCG, would be to separate their UK and European entities, although this would not be favoured by many due to the duplication of costs.