The exodus of banks from the City in the event of a “hard Brexit” would be modest and manageable, one of the world’s three biggest rating agencies has predicted.
A report by Moody’s said there would be a loss of business if the referendum result leads to Britain leaving the single market as well as the EU, but the impact would be less serious than some experts have suggested.
Since the vote, there have been concerns that a departure from the single market will result in the loss of passporting rights – the array of permissions granted to London-based banks and other financial companies, which allow them to operate across the EU and the wider European Economic Area (EEA).
Jens Weidmann, the president of the Bundesbank, said in a Guardian interview that without passporting rights London’s position as a financial centre would be jeopardised.
But Moody’s said the direct impact on the banks and financial services companies for which it provided ratings was “likely to be modest”.
It added: “The greater impact would be felt through higher costs and diversion of management attention, as the companies concerned restructure, reducing profitability for a time. This is credit negative but manageable. And other critical factors such as capital and liquidity, which are largely determined by global standards, are unlikely to face material changes due to Brexit per se.”
via The Guardian