Brexit To Have A Huge Impact On The UK Banking System

The United Kingdom is facing a crucial vote in June to decide whether to be part of the EU or not. And it can have a huge impact on the banking system.

As we all know, the United Kingdom is going to vote in June to decide whether to be part of the EU or not. When that happens, the banking system will be highly impacted by the outcome of the vote. The banking industry will be facing some big challenges if Briton decides to separate from the EU in coming June.

Nobody wants to discuss about Brexit

Without any doubt, one can say that this is a very complex topic. We have heard that the term “Brexit” was banned in the workplace of one of the banks in the country. As far as the banking executives are concerned, they are not interested in bringing up this topic at all. They choose to ignore this topic so that they don’t have to face the uncomfortable truth.

When asked about this, one of the employees in a London bank said that his colleagues are hesitant to talk about it publicly. It is simply because they don’t want to be blamed for influencing the outcome of the vote. EU Is Already Facing Problems With The Financial Troubles Looming In Greece. For more information, Click Here.

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The ramifications

But one can see from a distance that the changes to the EU banking industry will be huge if Briton votes against the union. As far as the short term ramifications are concerned, one can expect wholesale staffing changes at these banks all over Europe. As far as the bigger impacts are concerned, one can see jolts to cost of capital and central bank planning.

Here, one has to look at the real issues here. And one of the bigger concerns is how the market treats funding costs. This is going to be a real deal.

The challenges

We have to address the biggest challenges before us. Speaking of the treatment of funding costs of the market, here are the major concerns.

  • This could lead to spreads widening on bond deals.
  • Bank balance sheets could face turmoil. As we all know, bank balance sheets suffered majorly in 2016.
  • Credit spread pain could affect the U.S as well, according to Caldwell.

Pull back is inevitable

If Brexit becomes a reality, a pullback is inevitable. When EU came into existence, many banks in the European countries increased their presence in the UK, especially London. They increased their staff and other resources in the UK. If Brexit happens, most of these banks from other countries in the EU will be forced to pull back. Well, that also suggests that the UK banks operating in other countries in the EU will be forced to do the same. This can have a deep impact on the banking sector, which nobody can deny any longer.

Banks to feel the pressure

Banks can no longer escape the mounting pressure. If Brexit becomes a reality, tough framework will be established for banks operating in international offices. The banks in the EU will be forced to deal with the uncertainty and vulnerability of the situation. All the banks, including the big ones like Barclays, will be forced to deal with the new regulatory processes to make sure that they have a presence in other parts of the EU.


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