Many of the alternatives to passporting would not allow the financial sector to continue business as usual, the chief executive of the British Bankers' Association has warned.
Writing in his monthly newsletter, Anthony Browne noted that the passporting rules have "been a key factor in enabling the UK to grow as the financial capital of Europe".
Browne continued: "Some have argued that alternatives, such as equivalence, available to non-EU countries could provide similar access to the EU's single market in the event of a hard exit. In truth, the alternatives are poor shadows of genuine passports.
"They are not available for many banking or other basic financial services, provide much more limited rights at greater cost, are uncertain, and can be withdrawn at short notice."
Browne's warnings come at a time when politicians are indicating they might plump for a so-called hard Brexit.
Speaking alongside Browne at an event at the Conservative party conference yesterday, Charles Grant, director at the Centre for European Reform, warned:
There may be ways of getting [passporting]. But it will be very difficult.
If we make it our number one ask, and we are prepared to accept most of the rules of financial services that the EU makes, and perhaps we make some contributions to 'development in Eastern Europe' rather than calling [it] the EU budget and we establish some joint consultation mechanism to sort out disagreements between us then some sort of passporting is perhaps attainable, but it will take some hard work to achieve it.
Meanwhile, Bill Michael, global head of banking and capital markets at KPMG, told City A.M. that he broadly agreed with Browne that passporting was better suited for the banking sector than equivalence.
Michael noted government may struggle to keep the industry equivalent for any significant period of time, as the financial sector is "an area that is going to always be moving".
"Even what banks do today is not what they did 10 to 12 years ago," he added.
Earlier today, TheCityUK released a report which stated that as many as 75,000 jobs, along with £38bn in revenue, could be lost as a result of a hard Brexit.
According to figures from the Financial Conduct Authority, 5,476 UK-based firms use passporting to access markets throughout the European Economic Area, while 8,008 firms use the regime to access the UK market from other EEA states.
|What is passporting?|
|Passporting allows financial services firms which are authorised in the UK to operate throughout the European Economic Area, and vice versa. Without the rights, these firms would not be able to operate in other countries in the same way they do today.
According to Financial Conduct Authority figures, there are 13,484 firms in total which use passporting, of which 5,476 are based in the UK.
A number of banks and other companies are concerned these rights won't be secured in the Brexit deal so they'll need to find other solutions in keep servicing their clients.