European Union wants Brexit transition to end December 2020

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According to the BBC, EU lenders operating in Britain will not have to create subsidiaries based in the United Kingdom to carry on with their business even if London and Brussels fail to reach a trade agreement. There are now 160 worldwide bank branches operating in the United Kingdom, 77 of which are from the European Economic Area (EEA), with assets of more than £4 trillion.

The Bank's plans mean that European institutions will not need to convert their United Kingdom branches into subsidiaries - a move that will ease the burden for the financial services industry, which has urged negotiators to strike a cross-border deal.

The European banking passport system allows banks and other financial institutions authorised to operate in an EU country, or a member state of the European Economic Area (EEA), to conduct business across the union. But they present the risk that, in the event of a financial crisis, funds are quickly repatriated to the foreign bank's headquarters - leaving customers of the United Kingdom branch out of pocket.

An exodus would subsequently hit government coffers, as financial services account for a large proportion of the United Kingdom economy and generate billions in tax, and potentially put thousands of jobs on the line.

Unlike branches, subsidiaries are required to hold their own shock-absorbing capital, which can not be repatriated in the event of a financial crisis, offering an added layer of protection to their customers.

Carney told the Treasury Select Committee that it did not make sense to tell banks they must create subsidiaries, causing a "tremendous amount of cost and disruption", only to change the guidance if there is a co-operation agreement in the future.

But she looks set to avoid a second rebellion over plans to enshrine Brexit day in law, by offering some flexibility to move the date - March 29, 2019 - if negotiations with the European Union go down to the wire.

The European Commission said Wednesday that it wants a post-Brexit transition period, during which Britain must continue to obey EU rules, to finish at the end of 2020.

The Bank of England will on Wednesday unveil plans to allow European banks to operate in United Kingdom as normal post-Brexit, even in a "no deal" scenario, the BBC reported.

More importantly, however, allowing EU banks to keep their branches open will boost UK exports, as the services sold by the UK branch of a European bank to a third party count as UK exports.