The European Union has a unified standard for the provision of financial services. European banks, investment and insurance companies are licensed once to operate in all states of the region.
The UK and the European Union were to set new rules for finance as part of the trade agreement. But it turns out that the post‑Brexit trade talks do not include this issue.
British financial institutions will stop operating under the EU standard from 1 January 2021. They will no longer be able to obtain a single licence. Banks will have to open 27 new branches and obtain authorisation in each country to provide services across the EU. Many institutions will not go along with this expansion, so they will stop serving citizens and residents of the region.
If an EU citizen or resident has an account with a British bank, they will lose access to most services. For example, foreign customers will no longer be able to buy and hold securities, conduct foreign exchange transactions and obtain credit cards.
Which financial institutions will continue to serve EU residents
The Bank of England reported that the country’s financial sector is ready to operate after Brexit. Most banks will continue to serve European customers, but there may be disruptions during international transactions.
British banks would be able to operate under the old rules if they moved their headquarters to the EU. Another option is to open a subsidiary in the country of the region.
International financial holdings such as Citi and Morgan Stanley have moved assets and employees to Germany in order to operate under European law. Previously, they provided services from the UK.
London clearing institutions will continue to work with European customers as before. The EU has given permission for 18 months until there are no institutions in the region to replace the UK ones.
In the future, British banks and financial companies may enter the EU market without relocating their headquarters and without additional approvals. This will be possible if the EU recognises UK law as equivalent to European law.
What else will change for EU citizens and residents from 2021
In 2021, new rules for crossing the border into the UK will come into effect. Also citizens and residents of the European Economic Area need a special status to stay in the country.
Passport‑only entry into the UK will be introduced from 1 October 2021. UK Customs will not accept European ID cards as proof of identity. We talked about the new rule and exemptions in the material “UK announces new entry rules for EU residents after Brexit”.
Registration under the EU resettlement scheme will become compulsory from 30 June 2021. After that it will not be possible to live in the country with a residence card and certificate of registration in EU states, Switzerland, Norway, Liechtenstein and Iceland. We talked about this in the material “How to live in the UK with EU citizenship from 30 June 2021”.
It is possible to obtain a residence permit in the UK for investment. For this purpose, a foreigner is offered to buy government bonds or invest in a business from £2 million. The residence permit is issued for 3 years and can be renewed.