BoE to charge banks for additional Brexit costs

LONDON: The Bank of England is to increase the fees it levies on the banks it regulates to meet additional costs resulting from Britain’s move to leave the European Union — and may have to ask for more cash later on. The central bank’s Prudential Regulation Authority (PRA) published a consultation paper on Friday on its annual funding requirement (AFR) for the financial year starting in April. The proposed total requirement is £266.5 million, up 9.2 million on the current year, a rise of 4 per cent. Brexit is expected to reshape Britain’s financial markets, Europe’s biggest, given that banks based in London are likely to lose their unfettered access to the bloc’s single market.

Central bankers across the EU want to contain any threats to financial stability, such as from ruptures in cross-border customer links. “A new element of the PRA AFR is being proposed for 2017/18 for the recovery of certain costs associated with EU withdrawal,” the PRA said in its consultation paper. The extra costs are due to its work on regulatory issues concerning Brexit and reviewing current rules to ensure they still work after withdrawal,. “The PRA’s estimated costs associated with EU withdrawal activity in 2017/18 are £5.4 million.”

Activity in relation to Brexit “will require a significant amount of work to be undertaken by the PRA over a number of years”. And due to “uncertainty” surrounding the terms of withdrawal, the PRA said it may have to ask for more money from firms. Other changes are also making demands on the PRA purse. From 2019 banks in Britain must turn their retail arms into legally separate units with their own capital buffers. The aim is to shield customers and avoid taxpayer bailouts if a bank’s riskier investment operations go bust. — Reuters