Banks 'will need five years to prepare for exit from EU'
Banks will need at least five years to "effectively" prepare for Britain's divorce from the EU and will struggle to adapt by the 2019 negotiation deadline, a financial lobby group has warned.
The Association for Financial Markets in Europe (AFME), which represents wholesale banking interests and lobbies on the behalf of members including Barclays, said that services would be at risk without some sort of transitional agreement.
"Europe's key economic sectors currently have little clarity on the scale, scope and timescale of the eventual Brexit deal," the AFME paper added.
"The process is likely to be particularly challenging in wholesale banking, given the concentration of Europe's market capacity in the UK and the share of cross-border business currently conducted from a UK base.
"Affected market participants and supervisors will clearly need more time to prepare effectively for Brexit than the two years provided for by the Article 50 process".
It cited a study conducted for the lobby group by PwC, which suggested that "a further three years will be required to adapt" following the completion of the two-year negotiation period, adding that it will be "vital" to give an early indication of whether a transitional arrangement can be struck as part of exit negotiation.
The lobby group is pushing for a two-phase process which includes a short-term "bridging period" that will run until a new trade deal is struck between the UK and EU.
The report's recommendations work under the assumption of a hard Brexit, after Theresa May confirmed that the UK will give up access to the single market.