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Study for European banks says Brexit would harm sector
[LONDON] Banks in London would be hit hard if Britain left the European Union to trigger a long spell of uncertainty, a study conducted for European banking lobby AFME said on Monday.
The 68-page study commissioned from law firm Clifford Chance looked at the potential impact of "Brexit", or Britain voting to leave the EU in a referendum on June 23.
It is the latest warning that Brexit would be bad news for the financial services industry, Britain's biggest tax-earning sector and which operates across the EU. "Banks and investment firms are likely to be significantly and adversely affected by new restrictions on cross-border business," the study said.
Many banks, including international ones such as JPMorgan, Morgan Stanley and Goldman Sachs, have their European bases in London, the EU's biggest financial centre, and would lose their"passport" under EU law to offer services across the bloc.
"This 'passport' is key to the UK's appeal for many non-EU financial institutions," the study said.
Campaigners who want Britain to leave the EU say the UK could negotiate favourable new trading terms given the size of its financial centre and economy. They also argue Britain could write its own financial rules outside the EU.
The study said the EU can grant passports to non-EU lenders, which "could be an important mitigant allowing wholesale cross-border investment services to be provided in the EU".
But to obtain a passport, a non-EU lender would have to comply with rules the EU deemed to be "equivalent", or as strict as its own.
Like Norway, Britain would need to be a member of the European Economic Area (EEA), which offers some of the benefits of the EU's single market without being an EU member.
Unless Britain was in the EEA, any replacement trade agreement would have the potential to restrict cross-border trading, the study added. "There is likely to be a long period of uncertainty after a vote to leave as to whether these regimes will be available, which will affect market participants' business planning," said Chris Bates, a partner at Clifford Chance.
Exchanges and clearing and settlement houses for securities could also be hit by new restrictions unless they are recognised as "equivalent", the study said.
Last week Deutsche Boerse and the London Stock Exchange said their plans to merge would not be derailed by a Brexit.