UK banks may get temporary reprieve over Brexit

European regulators are considering making it easier, at least temporarily, for banks to handle some EU-related business in the UK immediately after Brexit, according to industry sources.

They say it may be possible in March 2019 when the UK leaves the EU to book trades done in centres such as Frankfurt out of London for a time. This has eased pressure on banks to rush staff out of London and is one reason that some banks have reduced estimates for the job numbers they expect to move.

The UK’s EU departure is expected to force banks to move thousands of jobs into the bloc so that they can continue processing EU-related trades. However, some banks have recently scaled back estimates of how many jobs will have to shift, with UBS saying last week it is likely to move fewer jobs than the 1,000 it had previously projected.

JPMorgan boss Jamie Dimon said before the Brexit vote that up to 4,000 of its 16,000 jobs in the UK might be at risk, but has since said it is not planning to move many jobs out of the UK in the next two years.

A spokesman for UBS declined to comment about whether the lower estimates were connected with a regulatory reprieve. The length of any grace period will likely be determined by the future trading terms with the EU.

Bankers say German bank regulator Bafin, the agency overseeing Frankfurt, where many banks are moving staff, has said there is leeway. “Bafin has told several banks that there would be a tolerance period,” said Oliver Wagner of Germany’s Association of Foreign Banks, saying he expected it to last one year.

A spokesman for Bafin was not immediately available for comment but president Felix Hufeld said earlier this month that “banks must be in a position to sensibly manage the associated risks comprehensively — in particular, if a back-to-back model should suddenly no longer be possible or would have to be revised”.

At the centre of discussions among regulators are back-to-back arrangements where a deal done on the continent could be processed and risk-managed at the bank’s base in London.

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