Latest posts by Julia Shudrik (see all)
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According to Moody’s, the influence of the UK formal exit from the EEA and the probable loss of “passporting” rights’ granted by the EU legislature will not put UK-based financial firms in jeopardy.
“Passporting” applies to a range of permissions given to banks, asset managers and financial market infrastructure providers under a range of EU law, which enables them to run operations across the EEA.
Moody’s stated that in case the UK leaves the single-office UK-based financial firms may be deprived of their passporting rights. If this happens, the firms will have to relocate their trading and middle workforce to the EU alongside the liquid assets, capital and IT infrastructure.
The agency mentioned that the relocation requires expenses, and will most likely affect the profitability, at least in the short-term.
However, Simon Ainsworth, the senior vice president at Moody’s, stated that financial firms are very unlikely to be deprived of all permissions.
The agency suggests that while banks that use the UK as an entry point for most EU operations should not be affected materially if they lost their EU passports, the uncertainty around the outcome of any new arrangement means that some banks might want to relocate some UK-based activities to the EU, before the Brexit negotiations are complete – and this may take years.