Banks Seem Oddly Unconcerned About Brexit

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(Bloomberg) -- Is the U.K. really going to leave the European Union? Judging from their lending activity, bankers might be having some doubts.

A couple of months ago, I looked at the volume of cross-border bank lending originating in the U.K. – a sort of indicator of the country’s, and particularly London’s, standing as a global financial hub. The data showed exactly the opposite of what one would expect if banks were worried about Brexit: The volume of lending from institutions located in the U.K., both domestic and foreign, had increased since Britain voted to leave the EU.

Given all the noise financial institutions have made about moving out of the U.K., this seemed odd. So when the Bank for International Settlements released data for the last quarter of 2017, I checked again. The result: Cross-border lending from the U.K actually increased by another $181 billion* -- the fastest pace since before the 2008 financial crisis. Here’s how that looks:

Also, by this measure, the U.K. remains by far the largest center for international bank lending, with $5.1 trillion in cross-border claims:

Of course, the exodus could still begin when the U.K. figures out how Brexit will actually happen. But all the government’s efforts at coming up with a plan seem only to demonstrate what a mistake it would be. Perhaps bankers sense something that the country’s leaders have yet to fully recognize. 

©2018 Bloomberg L.P.

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