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European banks reduce exposure to UK assets by €356bn

Within 2017 European lenders have cut their exposure to British assets by €356bn according to a European Banking Authority (EBA) report.

According to the same report, European banks in the 27 member states have a remaining €1.59 trillion exposure to UK assets.

The 35% year-on-year drop in derivatives exposure suggest European lenders are preparing for a hard Brexit scenario, in which no agreement is reached before the UK’s exit in March 2019.

Responsible for the regulatory alignment of the banking sector in the EU, the London-based EBA is scheduled to move to Paris as the UK is leaving the EU. 

There are major concerns over regulatory continuity, as the UK is linked to derivative contracts worth €22.4 trillion that may well be imperilled by Brexit.

The UK has not seen the mass exodus of financial sector jobs as regulators have been lenient in enforcing precautionary clauses. However, the City of London could lose anything from 75,000 to 100,000 jobs in the financial sector according to various estimates.