It is certain that banks across Europe have gone severely battered by Brexit. The day after the UK voted out to quite the EU, shares in big global banks drastically fell between 7 to 20%. Specially, non-UK banks have failed to make for all of their losses, though other parts of the market have considerably recovered since then.
Mentioned below are some of the ways that will affect foreign banks significantly. The ways are as follows:
Problem related to banking licences: Usually, the overseas banks put up their base in London and passport them to different member countries (27 European Union member countries). After the Brexit vote out, the foreign banks are facing months of uncertainty in regards to new European Union banking licences. The banks are also confused in discovering whether euro clearing will shift from London to Frankfurt or Paris. All this definitely leads to more expenses for planning and may be for relocation.
In longer term, the relocation can cut costs: It is expected that the incident of Brexit will cut down the number of people working in London. Banks may plan to shift to various other cheaper locations to operate. In fact, there are many banks that have already begun this process of relocation.
For short terms, trading revenues can increase: It has been seen that banks have witnessed record trading volumes just after Brexit. If numbers are to be believed then probably, the trading raised was reported as 10 times higher than the normal commissions.
For long term, trading revenues can decrease: In the months coming, the experts predict downfall in the trading revenues. It is sure that decreasing trading revenues will hit investment banks.
Downfall in investment banking revenues for short term: Brexit impacts greatly and increased economic, political and market uncertainty. In fact, it will reduce the number of deals and transactions.
Prevailing lower rates for longer time period: The heightened level of uncertainty and fragility will result in static rates till most of 2017. It is a well- known fact that banks make less money whenever interest rates are low, this is so because the gap between what is paid for funding and what is being charged for loans narrows down.
UK subsidiaries and branches to be less profitable: Basically, Brexit will ultimately result in lower loan growth as the economy will slows down and consecutively result in higher loan losses as well. In fact, the overseas banks in the UK region with big businesses will suffer the most.
Weak sterling will result in less valuable UK earnings: Since there is dramatic fall in sterling, it simply means that overseas bank will benefit less and that hold true for every profit they earn in the United Kingdom region.
US banks improves on relative strength as compared to European banks: The big US banks will definitely have an epic market share opportunity in comparison to weaker European banks. In fact, it has been seen that US investment banks have grown at the expense of European rival in the past few years. The US banks will still benefit proportionately.
Since, Brexit has affected banks so hard in the UK region; you definitely need to feel secure about your investments and money in banks. For the same, you can get in touch with professionals to seek assistance at Santander contact number.