Banks slash billions from UK exposure amid Brexit uncertainty


“Maybe there’s sort of wariness on the part of Australian banks in terms of getting exposure to the UK because of the risks of a hard Brexit,” said AMP Capital chief economist Shane Oliver. “The main uncertainty is what it means for global confidence.”

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The figures come ahead of next month’s UK election, in the lead-up to which Prime Minister Boris Johnson will campaign for a deal to leave Europe by the end of January, 2020.

The Reserve Bank noted in April that the main risk to Australian banks of a “disruptive” Brexit could be its impact on global funding markets, as credit exposures to the UK were low at only 1 to 2 per cent of assets.

One of the key Australian players in the UK, Macquarie Group, last week said Brexit was not “material” for the lender, and indeed it hopes to do more business in the UK and Europe.

Macquarie chief executive Shemara Wikramanayake said the bank had made a run of new investments in the UK recently, including ploughing $1 billion into an offshore wind project, and several of its most senior executives were UK-based.

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“It’s a big and growing region for us, not just the UK but whole European region. We’ve very committed to continuing to deliver service across that region,” Ms Wikramanayake said.

While Australian banks’ UK exposure has slipped, the BIS said there had been a strong increase in the total global bank lending to the UK in the latest June quarter.

KPMG’s national sector leader for banking, Ian Pollari, said the continuing uncertainty surrounding Brexit made planning a “challenge,” but Australia’s banks were well prepared.

Mr Pollari noted the UK was often used as an access point to the European market by Australian businesses, and he thought that any fall in bank exposure to the UK would be short-lived. “Just given the natural affinity between the two economies, I would expect to see a rebound to occur,” Mr Pollari said.

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