The Bank of England has published a staff working paper examining how regulatory barriers affected UK banks' cross-border activity after Brexit. Using confidential bank-level data, the paper finds that UK-resident banks substantially reduced lending to and deposit-taking from European Economic Area countries after Brexit, with some effects visible soon after the 2016 referendum. The largest effect fell on banks that lost passporting rights, which reduced their stocks of loans to and deposits from EEA countries by about 45% more than banks that had not relied on that authorisation, relative to their activity with non-EEA countries. The research covers 2014 to mid-2024 and finds that banks with greater pre-referendum exposure to the EEA also recorded lower lending and deposit-taking with the EEA after the referendum. It finds limited evidence that multinational banking groups offset the new barriers by shifting activity through foreign affiliates. While some affected groups increased the number of affiliates in the EEA, those entities did not show a corresponding rise in lending or deposit-taking activity. The paper concludes that regulatory access played a central role in shaping cross-border banking patterns and trade in services. As a Bank of England staff working paper, it is presented as research in progress to encourage comment and debate, and the views expressed are those of the authors rather than Bank of England policy.
Bank of England 2026-05-08
Bank of England working paper finds Brexit cut UK banks' EEA lending and deposits with banks losing passporting hit about 45% more
The Bank of England has published a staff working paper on how post-Brexit regulatory barriers affected UK banks’ cross-border activity with European Economic Area countries. Using confidential bank-level data for 2014 to mid-2024, it finds that banks losing passporting rights cut loans to and deposits from EEA countries by about 45% more than banks not reliant on that authorisation, with little evidence of offsetting activity via foreign affiliates. The authors conclude that regulatory access is central to cross-border banking and trade in services, stressing the views are research in progress and not Bank of England policy.