Lloyds Banking Group Plc is looking to establish a unit in Germany or the Netherlands in the event of the U.K. losing access to the single market when leaving the EU, the Financial Times reported Dec. 28, citing "two people briefed on the matter."
The most probable option for Lloyds would be to convert one of the two branches it has in Frankfurt and Amsterdam into an EU subsidiary, according to a person briefed on the plans. However, this would require the allocation of additional capital and a small number of staff, according to the FT.
The lender, which has a Dutch mortgage branch with some £8 billion of loans and a German online bank with about £12 billion of customer deposits, wants to ensure it does not lose its relatively small number of retail clients in the two countries and maintains access to the European payment system. Lloyds is the only U.K. high street bank that does not have a unit in another EU country, the FT noted.
Lloyds also plans to keep its Dutch and German clients alongside the rest of its retail activities within a new structure it is creating under the U.K.'s ring-fencing rules. The group has already combined its capital and financial markets divisions into one unit, to be headed by James Garvey, ahead of the law taking effect in 2019.
However, should the U.K. leave the EU, it may lead to a modification in the law to prevent European Economic Area clients from being included inside the ring-fence, causing the new structures to be reassembled, according to the report.