Banks will have to raise their capital by up to 30 per cent and bear an additional 4 per cent in costs due to Brexit, a new report finds.
In the wake of recent estimates made by the likes of HSBC that immediate Brexit disruption will cost the bank between $200m and $300m (£151m and £227m), consultancy Oliver Wyman warns that preparing for a hard Brexit will cause large European banks to duplicate resources and capital.
The consultancy is predicting a two percentage point dip in wholesale banks’ return on equity in Europe, and those serving corporate and institutional clients are looking at a $30bn to $50bn capital bill to prop up new European ventures.
Head of European corporate and institutional banking at Oliver Wyman Matthew Austen told the Financial Times: “Any time you split a portfolio up — whether it be a credit portfolio or a trading book portfolio — you lose the benefits of diversification that allow you to reduce the capital you hold against it.”
The consultancy also reiterated an estimate it made last year that up to 35,000 financial services jobs would leave the UK post-Brexit.
Oliver Wyman is the firm that picked up former Financial Services Authority chief executive Sir Hector Sants after he left the regulator.
Since the FSA became the FCA, it has spent more than £1.2m on consultancy projects with the firm.