Regulation  

EU Exit to hit banks

EU Exit to hit banks

Banks could lose regulatory clout if the UK votes to exit the EU, according to RBC Wealth Management.

Speaking at a round-table event , Frederique Carrier, director, head of equities, said a leave vote, would have consequences for UK banks which have businesses in the EU, as they “would lose the ability to influence EU regulation.” She added this could result in restrictions such as those imposed on Swiss banks, which can not offer all services in the EU.

With the vote looming on 23 June, foreign exchange could also be impacted in the event of an exit. Ms Carrier explained EU regulators may try to wrestle back some functions seeing as three quarters of EU foreign exchange is situated in London. “Over the long term it could mean a big change for the way UK banks do business,” she said.

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Asset classes on a global and domestic scale have seen high volatility so far this year and a vote to leave is likely to increase this. Dan Ellis, RBC’s head of investments for the British Isles, said, “One thing that investors should be acutely aware of is the fact that the results of the EU referendum will have an impact outside the UK.”

Lower yields for government and corporate bonds would be anticipated and the overall effect on the UK equity market would be ‘negative’, with small- or mid-cap stocks likely to be the most affected, as they are less domestically focused.

Ms Carrier said that we could expect a ‘‘negative knee-jerk reaction’’ from investors and global stocks would present a more attractive proposition, “In the event of Brexit, we would favour international instead of domestic companies,” she said.