US financial regulators are demanding regular updates from Wall Street banks about their contingency plans should Britain vote to leave the European Union.
Scenarios under scrutiny range from how their London operations would handle lengthy uncertainty if Britons opt to quit the bloc in a June 23 referendum, to whether they could still offer financial services in continental Europe from a non-EU Britain.
The Federal Reserve, Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC), which share responsibility for supervising US banks, have told the lenders to present specific plans for their businesses in the event of a “Brexit”, three sources said.
As well as the US regulators, the Bank of England is also seeking similar information from domestic and foreign banks operating in London, said the sources, who wished to remain anonymous as the process is private.
London’s financial sector, home to many international banks, is among the industries with the most to lose if the world’s fifth-biggest economy leaves the EU, according to many analysts who say an exit could lead to thousands of banking jobs shifting to the euro zone.
The European Central Bank is pushing hard for banks to move euro-denominated transactions from London, which lies outside its jurisdiction, to the euro zone where it can supervise the business more easily.
A vote to leave would be particularly difficult for US investment banks since most run the bulk of their European trading operations out of London offices.
Many use a “passporting” system that enables them to offer services across the EU from their UK-regulated entities.
If Britain were to leave it is unclear whether this would still be possible, or if the banks could trade certain types of European securities from London.
The Federal Reserve, FDIC and OCC declined to comment, as did the major US investment banks in London – Bank of America Merrill Lynch, JPMorgan, Citi, Goldman Sachs , and Morgan Stanley.
Support for Britain to remain in the EU stands at 49 per cent, 10 points ahead of the “out” campaign, according to an Ipsos MORI poll published in the Evening Standard newspaper on Wednesday.
However, the poll also suggested that a reduced turnout would favour the pro-Brexit campaign, closing the gap to six points.
Goldman, Morgan Stanley, Citi and JPMorgan have donated money to the Britain Stronger in Europe group, which is campaigning for the country to stay in the EU, sources have said.