The Bank of England Financial Policy Committee issued a warning at the start of October 2017 that EEA banks are not sufficiently focused on Brexit. Assuming that Britain loses access to the single market upon Brexit, banks who currently rely on passports to provide services in Britain will find themselves unable to continue.

The Financial Policy Committee high-lighted this risk and warned that EEA banks are not taking the necessary steps to mitigate the issue. If even a handful of banks do not have the requisite contingency plan in place, there could be disruption across the UK banking sector.

So what should foreign banks be doing to alleviate these concerns? Banks need to have contingency plans in place that recognise and address the scenario where the UK exits the EU without an agreement on financial services. Should this happen, foreign banks whopassport into the UK will need to either stop providing regulated services in the UK or seek the appropriate UK authorisa-tions to continue providing the services.

Contingency plans ought therefore to consider one of the following options: (i) set up a UK subsidiary and apply for UK authorisation; (ii) make use of an existing UK subsidiary and transfer all business lines requiring UK permissions into the subsidiary; or (iii) stop providing regulated services in the UK.

The main concern for the Bank of England is that the three options above take time to implement and are likely to involve some input from the regulator; for example, obtaining a new UK authorisation or making use of a Part VII scheme to transfer business in the UK. If banks rely on improved negotiations between the EU and the UK and wait until the last minute to prepare, there is a risk that there will not be enough time to ensure the relevant steps are taken.

The Bank of England has strongly implied that a "wait and see attitude" is insufficient and the Financial Policy Committee expects banks to start their applications for authorisation before the end of the first quarter of 2018.

The message to EEA banks is clear but other banks should also be conscious of two things. Firstly, that the regulator may suddenly receive an influx of authorisation requests that could keep it very busy during the course of 2018. Secondly, that it in the interest of the financial market as a whole that every bank is prepared for Brexit, as one unprepared bank could cause ripples of disruption. Banks might want to consider not only if they are ready for a no- deal scenario, but how they will cope if there counterparties, or the market more broadly, are not.