In the past 12 months, the banks have removed a whopping £313.2 billion worth of assets from their balance sheets, representing a fall of 17 per cent.
Financial analysts have indicated that the banks are protecting themselves against the possibility that the UK may be forced into withdrawing from the Brexit talks with the European Union, resulting in a ‘no deal’ scenario, which would create uncertainty over existing financial contracts.
Banks in the other 27 EU countries have reduced their total assets tied to the UK from €1.94tn to €1.59tn between June 2016 and June 2017, according to official European Union data.
Banks’ liabilities also decreased over the same period, dropping from €1.67tn to €1.34tn, the European Banking Authority said.
The EBA conceded the risk of a “cliff edge” Brexit was the main factor hanging over all of Europe’s banking system — and not just over that of the UK.
One third of banks, polled by the EBA, are concerned about the legal risks arising if the UK dropped out of the Brexit talks without a deal which would have a wide-ranging impact concerning various areas such as financial contracts, data protection and how court judgements might be enforced.
The EBA said: “It is important that banks and their counterparties, as well as consumers and public authorities, consider appropriate mitigating actions and contingency plans to address these concerns.
“These risks may, in the short term, endanger the continuity of cross-border financial flows and services between financial service providers in the EU-27 and the UK.”
The figures have been revealed after Paris was announced as the new home of the EBA once the UK has left the bloc.
The French capital beat out Dublin after the two cities were tied in a final round vote to host the European Banking Authority, with the eventual name being picked out of a hat on Monday.
Frankfurt, touted as an early favourite and home of the European Central Bank, was kicked out in the first round.
The EBA is responsible for writing standards that EU banks should abide by — how to calculate potential losses on risky loans, for example — as well as carrying out stress tests on them to safeguard the financial system.