Brexit transition deal needed by Christmas, says Bank of England deputy governor

Announcement coincides with Goldman Sachs moving to new office in Frankfurt

One of the senior staff of Bank of England (BoE) has warned that Britain and the EU must make progress on a Brexit transition deal by Christmas or risk seeing banks and financial firms leave.

Talking about the need of a watertight Brexit transition deal by Christmas, Sam Woods, the chief executive of the Prudential Regulation Authority (PRA), which is an arm of the BoE, said: “If we get to Christmas and the negotiations have not reached any agreement on this topic, diminishing marginal returns will kick in. Firms would start discounting the likelihood of a transition in the central case of their planning.”

Woods is one of the BoE’s most senior staff in charge of banking regulation and was speaking at the annual Mansion House dinner hosted by the Lord Mayor of London, Andrew Parmley, who also spoke on the need to secure a transitional deal by the year-end.

“I struggle to see an outcome in which banks and insurers do not get harder to supervise and harder to resolve for all involved,” Woods added.

Wood’s speech coincided with Goldman Sachs announcing late last evening that it has taken new office space in Frankfurt to prepare for Brexit.

“This expanded office space will allow us to grow our operations in Germany to continue serving our clients, as well as provide us with the space to execute on our Brexit contingency plan as needed,” the Goldman Sachs spokesman told media.

According to media reports, British prime minister, Theresa May has pledged to secure a transitional period of “around two years” but the EU has yet to make its position clear. Without a legally binding transition deal by year-end, banks would have to start applying for licences in the first quarter of 2018 to allow enough time for regulators to process them.

A transitional deal reportedly allows financial firms a “passport” to sell their goods and services across the EU while headquartered in one member country of the bloc.

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