Brexit:Options for Banks from the UK to Access the EU Market

UK banks who want to maintain an access to the EU market after BREXIT are currently assessing their options. The prospect of a free trade agreement with the EU remaining uncertain, they cannot rely on such an agreement before taking a decision. The present paper sketches the three main options - i.e. servicing EU clients directly from the UK, creating a branch or establishing a subsidiary - comparing their benefits and restrictions under the GATS rules and the free movement of capital and freedom of establishment under the EU Treaties. The focus is on traditional banking activities leaving aside investment services. Whilst acting through a EU based subsidiary appears to be the most promising option for UK banks who ambition to serve clients on a EU scale, the choice of location is not trivial as Member States are competing to attract such subsidiaries to their jurisdiction. The ECB in its supervisory role of the banking sector has already signaled that it will not allow such competition to result in a supervisory arbitrage.