Regulator the Financial Conduct Authority has written to banks warning them about moving business away from the UK because of Brexit.
Banks have been opening European subsidiaries and moving staff to locations that will remain inside the EU post-Brexit such as Amsterdam, Frankfurt and Dublin to ensure they are able to service customers after the UK leaves the trading bloc.
An FCA spokesperson confirmed that it had warned banks about their actions in relation to Brexit, saying: “We have emphasised to firms that we expect decisions taken by them in relation to EU withdrawal to be consistent with our statutory objectives, which includes the interests of their clients”
A letter seen by Financial News and signed by the FCA’s executive director for supervision Megan Butler warned banks that moving non-EU clients outside the UK could expose them to increased costs and new risks.
The letter read: “We are prepared to intervene where we see steps being taken which could expose clients or markets to unacceptable risks."
It said banks should “make the minimum necessary changes required” and clients “should not be moved out of the UK until the FCA is satisfied” that the companies in question have “fully considered the impact” of such plans.
FCA director Andrew Bailey today denied the warning was politically motivated, telling the Treasury Select Committee the letter was "entirely consistent with our objectives and statute to firms."
A number of banks have looked to bulk up their EU operations ahead of Brexit amid worries that the ability of banks to sell their services from London across the EU will be disrupted by the UK’s exit.
US banking giant Citi has strengthened its Paris offices, hiring bankers from rival firms and moving senior executives from other locations to the French capital.
The bank is expected to move around 250 jobs out of London as a result of Brexit.
A Reuters survey showed that the number of jobs banks expected to move away from the UK has fallen as Brexit approaches.
The survey showed that the number of jobs major banks expected to move in the event of a hard Brexit was around 5,800, a fall from the 10,000 jobs expected to move in the same survey a year earlier.