by Sinead Cruise and Lawrence White — Reuters
LONDON (Reuters) – Lloyds Banking Group (LLOY.L) has secured a banking licence for its new Berlin-based subsidiary, a source familiar with the matter told Reuters, as part of long-standing plans to Brexit-proof its business with European Union clients.
Until now the lender’s Berlin office has run on a standard passporting licence that Lloyds – and other British lenders with customers in the EU – stand to lose when Britain leaves the bloc.
With only 71 days to go until the planned March 29 departure, Britain’s banks are forging ahead with plans to ensure they can keep serving customers in the EU if political stalemate over the withdrawal agreement results in Britain crashing out without a deal.
Lloyds’ Berlin office, located on the city’s famous Alexanderplatz, was a former Bank of Scotland branch the group inherited when it took over HBOS at the peak of the financial crisis a decade ago.
Lloyds employs around 300 people in Berlin, including a full management team, finance, risk and human resources staff, who serve its retail and corporate banking customers in Europe.
As part of transforming the Berlin branch into a full subsidiary, its capital will require bolstering by Lloyds, by a sum in the low hundreds of millions of pounds, Reuters has reported.
Licences the bank has applied for in Frankfurt and Luxembourg remain outstanding, the source added, but the bank is expected to have all regulatory approvals in place by March 29.
The need for multiple subsidiaries with different licences is due in part to British ring-fencing rules put in place after the 2008 financial crisis, which require depositors’ money to be separated from riskier investment banking activities.
The Lloyds Luxembourg hub will serve the bank’s longstanding life insurance customers, Reuters reported in September, while the Frankfurt unit will house the bank’s EU-based bond-trading business.
Royal Bank of Scotland (RBS)(RBS.L) is not far behind rival Lloyds in its efforts to secure its own German licence, and Chairman Howard Davies was in Frankfurt on Tuesday for talks with German regulator Bafin.
The licence would be in addition to an existing licence held by its Amsterdam-based NatWest Markets business and ensure access to euro payment and euro liquidity markets via the German Bundesbank.
Last month the state-owned bank said it planned to move 6 billion pounds of assets and 7 billion pounds of liabilities to the Dutch subsidiary as early as March, unless a deal is reached between Britain and the EU.
(Reporting By Sinead Cruise and Lawrence White; Additional reporting by Iain Withers; Editing by Rachel Armstrong and David Goodman)