The chairman of RBS, Sir Howard Davies, has backed calls for a transitional deal with Europe when Britain leaves the union, warning of the risk to banks if they swiftly lost access to the single market and passporting rights.
"I think it is damaging if we don't get a transitional deal, because I think you will then see banks and financial institutions making decisions on the basis of uncertainty," he said speaking on ITV's Peston on Sunday show.
"They will not wait because they have to make a decision which will allow them to continue to function in the event of a hard Brexit if that's a possibility. So they will not sit back, they area currently making contingency plans and once you've got a contingency plan, there's a risk you might implement it one day, therefore I think that is quite urgent."
Cutting off London's financial services from Europe risks destabilising "the whole of of the European financial markets", said the bank boss, who was opposed to Brexit.
"… what is really important is the transitional arrangements, so what we are particularly focused on in the City at the moment is to try to get an understanding that actually allowing a cliff-edge departure of Brexit would be damaging to everybody because about three quarters of all European capital market transactions take place in London, often by French banks or German banks et cetera but they take place in London."
Davies downplayed RBS's own exposure to Brexit, however, and said that any decision on moving parts of the business abroad would not be taken until the bank knows whether there will still be passporting rights.
"… But RBS in fact as a very British focused bank these days having had a lot of foreign adventures which didn’t turn out too well, we’re not so much affected by Brexit ourselves," he said.
"We would need to make decisions when we know whether or not we could passport from one to another but we don’t have to set up a new entity in order to do that. We own them.
"… there are certainly banks who are very concerned, they are particularly the American banks and the Japanese banks who have an operation in London which serves all of their European clients. And indeed the rationale for them to be in London is that it is part of the European single market and therefore they can do all of their business from one place. They are very concerned."
Davies also poured cold water on any expectations that there could be a sale of taxpayer-owned RBS shares anytime soon as it waits for a settlement to be agreed with the US Department of Justice (DOJ).
"We have one major issue to resolve which I think stands in the way of a significant share sale at the moment, that is the subprime mortgage business that the bank did way back in 2007 in the United States. And we still have an outstanding settlement with the US Department of Justice, you’ll have read recently about Deutsche Bank in negotiating the same thing. It’s the same story, we seem to be a little bit behind.
"I think that makes, that makes life difficult to value the shares," he said, adding that he didn't know wha the election of Donald Trump would mean for the settlement.