Once Britain begins formal negotiations for exiting the EU, known as Article 50, it will have two years until it ceases to be a member of the bloc.
Three of the most senior executives in the City of London told politicians yesterday that this was not long enough for banks to reconfigure business models.
“It’s a multi-year process if it’s going to be completed safely and not going to risk financial stability,” Alex Wilmot-Sitwell, president of Bank of America Merrill Lynch told a House of Lords committee.
“I suspect it’s two to three years,” he said.
A too-short transitional period could increase risks by forcing firms to move risk management and other financial products. “You don’t move nuclear waste in a race,” he said.
HSBC Group chairman Douglas Flint said it would take several years for a bank in London to complete the “enormous task” of setting up a new subsidiary in the EU.
Mr Flint is on a panel of financial services chiefs advising the British government on new trading terms after Brexit.
“Our role is not to lobby but to inform, and we have had very good engagement so far,” Mr Flint said.
Banks in Britain depend on an EU ‘passport’ to serve clients across the 28-country bloc from one base and lenders worry that these passporting rights will end after Britain leaves the EU.
EU leaders have said pass-porting rights would be scrapped unless Britain continues to accept the free movement of EU citizens, a condition seen as unlikely to be accepted.
Jean-Claude Juncker, who heads the EU’s executive European Commission which will negotiate new trading terms with Britain, said he wants to begin exit talks soon.
“Part of this new order is that only those who respect the free movement of people and labour can have unlimited access to the single market.
“There won’t be single market a la carte,” Mr Juncker said in the European Parliament in Strasbourg.