The Bank of England has revealed its plans for the future oversight of European Economic Area (EEA) bank branches operating in the UK - so called ?incoming? banks that will lose their passporting rights to operate in the UK post BREXIT.

At the moment there are 77 branches of EEA banks operating in the UK that are authorised to take deposits, lending more than £1 trillion, or 15 per cent of all loans to UK residents. This is an important announcement that reduces uncertainty for those banks, the majority of which are members of UK Finance.

The Prudential Regulation Authority's (PRA) decision to take a pragmatic approach and permit EEA branches to convert to third country branches, where there is good regulatory cooperation, is one that UK Finance has been advocating for some time. It will ensure that the extra costs of subsidiarisation  ?   for instance ring fenced capital and liquidity  ?  will not be passed on to UK customers.

Particularly for systemically important EEA wholesale branches, the PRA has proposed in its consultation paper that it will apply its existing approach to the authorisation of non-EEA third country branches. This focuses on its ability to influence supervisory outcomes for the group, including the UK branch, either via the existing college system or bilateral engagement supported by prompt information exchange, particularly if problems start to emerge.

Where the PRA does have concerns about supervisability there is no automatic assumption that a branch would have to convert to a subsidiary. Instead the PRA might impose extra governance requirements under the senior managers? regime, restrict the branch's business model or impose additional liquidity requirements. In my view this is an appropriate and proportionate approach.

Other issues remain to be addressed, including the contractual certainty of existing cross-border financial contracts. Also to be discussed, how to replace the current passporting regime for UK banks providing financial services into Europe after the end of March 2019 and any agreed period of transition and adaptation.

These ?outgoing? banks are important for EU-based buyers of financial services. For every ?1 spent by a UK buyer with an EU-based financial services company, EU based buyers spend more than ?6 purchasing financial services from UK-based companies. As the Bank of England pointed out in its press release yesterday, UK-located banks underwrite around half of the debt and equity issued by EU companies, and are counterparty to over half of the over-the-counter (OTC) interest rate derivatives traded by EU companies and banks. London also has the largest share of cross border bank lending and foreign exchange trading. Enabling these outgoing banks to continue to support their EU based clients will depend on the results of the UK's negotiations with the EU about the shape of a future trade agreement that includes financial services.

The PRA's supervisability approach reflects the elements of UK Finance's proposals for an ambitious EU-UK free trade agreement for financial services described in its report Supporting Europe's Economies and Citizens: a modern approach to financial services in an EU-UK Trade Agreement. This proposes a variable approach depending on the likely levels of supervisory concern, a symmetrical approach based on mutual acceptance of regulatory and supervisory cooperation and reciprocity and the need for an adaptable cross border financial services framework that can respond to technological developments or other changes. Its application to the supply of outgoing financial services would ensure that EU companies could continue to use London's international financial services centre to meet their financing and risk management needs.

Indeed, this model could form a blueprint for all regulatory cooperation in global financial services, not just with the EU. UK Finance's members operate in the global financial markets. It is important to them, and their customers, that international standards, such as the Basel framework for prudential regulation, are applied in a harmonised way based on transparent implementation and mutual trust between supervisors around the world.

Whilst the first priority is for an EU-UK agreement on financial services, we should not ignore the benefits that a wider application of UK Finance's proposals might bring. The PRA's proposals on the authorisation of EEA branches post BREXIT provide a welcome and robust blueprint.