Written by:
Nicholas Edge, Principal, Prudential and Foreign Banks Policy, UK Finance


UK Finance has responded to the Bank of England’s recent consultation on its approach to the authorisation of bank branches currently operating in the UK under an Economic Area (EEA) passport – so called ‘incoming’ banks that will lose their passporting rights to operate in the UK post-Brexit.

Our response supported the PRA’s pragmatic approach and we hope that the PRA has paved the way to allow its EU27 counterparts and the Single Supervisory Mechanism to adopt a similar approach. Indeed, this model could form a blueprint for an international standard for the supervisory oversight of cross-border banking activities, which many UK Finance members would welcome.

Of note is the acknowledgement that a branch model for wholesale activities is an appropriate one that benefits the UK economy. This is something UK Finance has been keen to promote in its proposal on the future post-Brexit framework as branches provide a valuable means of providing services to customers through a physical presence, without the full cost, complexity and duplication of establishing full subsidiaries. But we recognise too that the PRA’s approach is predicted on appropriate supervisory cooperation with the branch’s home state regulator and a shared a common view of what good regulatory objectives and outcomes are.

There are 77 branches of EEA banks operating in the UK and it is expected that 66 of these will be applying to convert to third-country status, with the remaining subsidiarising due to being predominantly retail-focused. This seems like a sensible outcome and should ensure that unnecessary costs are not passed on to customers. We do have some reservations about how the PRA articulates its threshold for retail activities, which may bring into scope some business activities that could reasonably be done through a branch, particularly where the client operates in multiple jurisdictions, but we believe this is a definition issue rather than a concern with the spirit of the PRA’s proposals.

In the UK at least, all that is needed now is for the practical application process for converting to a third-country branch to be sensibly streamlined given these firms will, for the most part, be well-known to the PRA, albeit by the Supervision teams rather than Authorisations.

Branch Authorisation – UK leading the way