Germany’s finance ministry is planning to allow British financial firms access to its domestic market under a transitional arrangement if there is no agreement from negotiators, according to a government strategy document cited by Bloomberg.
The proposal, which would need EU assent, would see reciprocal access allowed between the UK and the remaining EU nations for a limited time.
The document does not mention any requirement for British banks to be domiciled in Europe during the transition, Bloomberg reported.
That would represent a major boon to British banks and other regulated firms operating in Europe, allowing them to delay the implementation of costly moves to set up fully functioning subsidiaries in EU member states while they waited for a clearer indication of the post-Brexit trading relationship.
Financial firms, lobby groups and regulators from around the City have repeatedly called for the UK and EU government to agree a transitional period by Christmas.
This week the Treasury’s head of financial services warned firms will start moving operations out of the UK if there is no certainty by the end of the first quarter of 2018.
German regulators have given mixed messages about the status of British banks after Brexit. In June European Central Bank vice-president Sabine Lautenschlaeger warned banks not to delay applying for a licence in the EU if they wanted to continue marketing their services abroad.
Meanwhile, German central bank executive board member Andreas Dombret warned in February that the UK will not be the “gateway to Europe” after Brexit. The Bundesbank has also created a website to encourage banks to move from London to Germany.
However, some European policymakers recognise that any sudden “cliff edge” for financial services if no deal is agreed would harm EU companies’ ability to access London’s deep capital markets. That would potentially harm Europe’s growth, albeit to a lesser extent than the damage anticipated by the vast majority of economists in such a scenario for the UK.
The German finance ministry could not be reached for comment.