Large banks with a presence in the U.K. feel that in the wake of the uncertainty surrounding the Brexit vote, the country’s government is not fully receptive to the financial services sector, reported CNBC citing an industry source with knowledge of the situation.

While the U.K. Treasury is very receptive to their ideas about a “smooth Brexit”, other government departments are less sympathetic, feels a wide range of banks, both big and small, the sources reportedly said.

Due to the uncertainty surrounding Brexit, a number of banks are planning to move their operations out of London, the source further added.

“Banks with large numbers of customer accounts in Europe and banks financing infrastructure projects, bonds and derivatives in Europe are among those looking to move out of London,” the source added.

Big banks were preparing to relocate out of the U.K. early next year, wrote the British Banking Authority (BBA) chief, Anthony Browne, in an article in U.K.’s Observer newspaper on Sunday.

The political and the public debate is taking us in the wrong direction, the BBA head said. The hands of most international banks are quivering over the relocate button and most big banks have project teams working on which operations to move and when, he wrote.

“Many smaller banks plan to start relocations before Christmas; bigger banks are expected to start in the first quarter of next year,” Browne wrote in the article.

The uncertainty around Brexit negotiations has the financial sector worried even as a number of bank chiefs and market analysts have said in the past that London will continue to remain a major global financial center.

“Banks are concerned about the uncertainty over ‘passporting’ rights and want a transition agreement to be put in place that will cover a period of time when the current regulatory framework continues before the new Brexit deal kicks in,” the source told CNBC.

Since passporting means U.K. businesses can provide financial services anywhere in the 28-country bloc while being based and regulated in the U.K., it is an important feature of the EU’s single market access, especially for banks.

Banks haven’t done anything so far even though they may have some plans to relocate, one analyst reportedly told CNBC on Monday.

“Brexit uncertainties are very much relevant for this sector. However, although banks may have some plans under different scenario to relocate, they have done nothing so far to change their behavior after Brexit. Eventually if the financial sector has to move it will be a very severe shock for the economy but for now nothing has really changed,” Thanos Vamvakidis, head of European G-10 FX strategy at BofA Merrill Lynch Global Research said.

We will know the impact of U.K.’s decision to leave the European Union only after “Article 50” is invoked, Vamvakidis further explained. Detailing what happens when a member leaves the group, “Article 50” is the section of the EU’s treaty governing leaving the 28-country bloc.

“It is too early to tell. Clearly the headlines have been more towards the direction of ‘hard Brexit’. However, we have to wait for ‘Article 50’ to be triggered and most likely we are not going to see any serious discussions before the German elections. We will know the actual direction of events in 2018. It is too early to tell at this stage,” Vamvakidis said.

The European banking index has reversed all post-Brexit losses and is trading at its highest since June 23, even as banks may be struggling with uncertainty surrounding Brexit.

(Adapted from CNBC)

Categories: Economy & Finance, Strategy, Sustainability