Leaving the EU Single Market and losing passporting rights would be far from a disaster for the City of London, leading analysts at Moody's have found.
The new research comes amid ongoing wrangling between the UK and Europe, between government ministers and across different industries all competing to put their views about what deal Theresa May should try to achieve with the rest of the EU.
The debate over passporting rights – the EU rules which let financial services firms operate across the 28 members from a base in London – has been fought ferociously in the City, but Moody's believes concerns may be over-hyped.
"On the face of it, [losing passporting rights] could be significant for many London-based firms, forcing them at a minimum to apply for authorisation to do business in other states, or at worst having to move staff and operational processes to a location within the European Economic Area (EEA)," Moody's stated."
However, the ratings agency added: "In practice, we expect the impact of a formal withdrawal of the UK from the EEA to be limited for most UK banks."
The report could prove reassuring reading after Jens Weidmann, head of the German Bundesbank, said over the weekend that leaving the Single Market would automatically strip British-domiciled banks of their right to work across the EU.
Researchers cited EU equivalence rules – which apply to countries with broadly similar regulatory regimes – as allowing countries outside the EU to be treated on preferential terms. Moody's listed a lengthy catalogue of financial activities which could be protected for "global investment banks" under the scheme if they chose to stay in London, including foreign currency trading, trade execution, underwriting, portfolio management, and sales of derivatives.
"These provisions should also ensure that EU banks can operate in international capital and money markets which are largely based in London."
Any "costs" of a loss of passporting rights for the UK's banks would largely be as a result of any internal restructuring, temporary hits to profitability and a diversion of management resources while financial services firms figure out the new rules of the UK's relationship, Moody's said. "Other critical factors, such as capital and liquidity which are largely determined by global standards, are unlikely to face material change due to Brexit".
The City of London corporation indicated it was too early to dismiss concerns about a loss of access to the Single Market. Policy chairman Mark Boleat said: "Passporting is still a crucial issue for financial services firms and the uncertainty is causing real problems. What exactly its loss would be depends on both the sector and business model of any company.
"For some retail banks it is of almost no real importance. But for the whole of international investment banking and an institution such as Lloyds of London, it is an absolutely necessity."
Despite playing down fears of a mass exodus, Moody's did say it was "likely that some banks and other financial services companies may choose to move some UK-based activities to the EU before the withdrawal negotiations are complete, given the uncertainty of the outcome."
In response to the report, a spokesperson for the Treasury said: "Our position is absolutely clear, we want the best deal for trade in UK goods and services, including our world leading financial services industry.
“That is why, along with the Department for Exiting the EU, we are speaking to the financial services industry to make sure that we understand fully the issues affecting it as we prepare for negotiations to leave the EU.
“We want Britain to remain a great place for financial services and we stand ready to help the industry maximise the opportunities that leaving the EU presents.”