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COMMENTARY

Maybe banks really aren't worried about Brexit

IN many ways, bankers seem to be getting ready for Britain's exit from the European Union. Bank of America is setting up a new Paris office. A Deutsche Bank executive received a multimillion-euro bonus for overseeing preparations. Estimates of the number of jobs to be moved from the UK to other European countries run into the thousands.

Yet one thing has changed surprisingly little: the volume of business that the banks do out of their UK offices.

London has long served as a nexus for international lending - and not just by UK banks. A German bank might use its UK subsidiary to lend to a Guernsey hedge fund. A US bank's London office might lend to a French industrial company. The Bank for International Settlements tracks these cross-border claims, which serve as a useful indicator of the UK capital's financial preeminence.

A while ago, I started monitoring this lending to figure out whether Britain's decision to leave the EU was having a detrimental effect. Initially it wasn't, and then, in mid-2018, it seemed to be.

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Now, though, it's pretty clear that the quarterly changes I saw were little more than noise: They weren't unusually large by historical standards, and they swung back up again around the end of 2018.

Why aren't banks fleeing?

Here's how that looks: All told, according to the Bank for International Settlements, the claims of banks' UK offices on borrowers in other countries have increased by a cumulative US$250 billion since Britons voted to leave the EU in June 2016. That's not huge in relation to the nearly US$5 trillion in total claims outstanding, and pretty close to the average rate of growth for the past few decades.

Given the risks, why aren't banks fleeing? One possible explanation is that there's no need to hurry: Once they've prepared their offices elsewhere in Europe, it's easy to move the assets when necessary. Another possibility is that bankers don't believe the UK will actually leave, and hence aren't really prepared. If so, Britain's exit, if it happens, could prove a lot more surprising - and a lot more damaging - than it otherwise would be. BLOOMBERG