EU government debt agencies have begun the process of switching contracts from London branches of banks to divisions in the bloc ahead of Brexit.
Several countries have started changing their “primary dealers” – banks used by governments to manage their borrowing – away from London.
Officials from five countries told Reuters this process had already started ahead of Britain’s exit from the EU on 29 March.
It comes amid increased threat of a no-deal Brexit, which could see UK entities lose their passporting rights allowing the financial services sector to serve clients in the EU.
Countries such as Italy, Spain and France list UK-incorporated Barclays, JP Morgan Securities and Nomura as primary dealers.
But with EU member states scrambling to switch contracts, the burden is being placed on the banks.
“You have a lot of countries doing it at the same time. The pain is made a bit bigger because the banks choose different ways of handling Brexit,” said Thorsten Meyer Larson, head of investor relations and risk, government debt management at the Danish central bank.
“I would prefer strongly we had one solution, but that’s not possible. I understand why they have different ways, but it means we have to bear part of the burden of adapting,” he added.
Around 70 per cent of European government bond issuance is believed to go through the UK and its main banks.
“Such a vast amount of bonds are issued under English law,” said Gyorgy Barcza, chief executive of Hungary’s debt management office the AKK.
“Maybe for the future euro issuance will have to be changed, but that could be very challenging,” he added.