LONDON, Sept 19 Banks in Britain would suffer
only a "modest" direct hit if they lost "passporting" rights to
the European Union's single market, Moody's Investors Service
said on Monday.
Under EU passporting rules, banks based in Britain can serve
customers across the bloc from a single base, saving on the cost
of having to apply for licences in each country. Financial
lobbyists say the loss of these rights would be a blow to London
as a global financial centre.
But Moody's said the direct impact from loss of passporting
rights is likely to be modest and manageable, though job losses
in the City of London financial district are likely.
"The greater impact would be felt through higher costs and
diversion of management attention, as companies concerned
restructure, reducing profitability for a time," Moody's said.
Investment banks could continue to offer some services under
so-called equivalence, where they comply fully with EU rules in
return for access, Moody's said.
"However, equivalence provides less certainty than
passporting, as it depends on a European Commission
determination, which is a political decision that can therefore
take time and be withdrawn at a future date," Moody's said.
It is likely that some banks may choose to move some
UK-based activities to the EU before the UK's withdrawal
negotiations are complete, given the uncertainty of the outcome,
and the timing or impermanence of any equivalence decision, it
Jens Weidmann, head of Germany's Bundesbank, said on Monday
that banks in Britain will lose access to the EU market after
Brexit unless the country remains in the broader European
trading group that includes countries like Norway.
(Reporting by Huw Jones; editing by Susan Thomas)