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Report: Brexit could cost banks up to $50B in capital for new units

The U.K.'s exit from the EU could cost banks $30 billion to $50 billion in capital costs to back their new European subsidiaries, Bloomberg News reported Aug. 1, citing a report from consultancy firm Oliver Wyman.

The estimate is equivalent to 15% to 30% of the capital that wholesale banks currently allocate to the region, the report noted, adding that moving London-based operations to the EU could push operating costs up by $1 billion.

A "hard Brexit," in which banks lose the right to offer services to EU customers from London, would negatively impact the profitability of the European wholesale banking market, with banks' returns on equity levels potentially dropping by two percentage points, according to the report.

The challenges will put into question the viability of some activities, Oliver Wyman said, adding that "some banks may even choose to withdraw capacity from the European market as a whole and re-deploy to other regions, such as Asia or the U.S."