LONDON (Reuters) - The EU bank watchdog has urged member states to protect customer deposits in branches of British banks in the European Union if Britain leaves the bloc this month with no deal.

FILE PHOTO: Storm clouds are seen above the Canary Wharf financial district in London, Britain, August 3, 2010. REUTERS/Greg Bos/File Photo/File Photo

Bank deposits are covered by national deposit guarantee schemes which protects sums up to 100,000 euros under EU law - but that does not extend to branches of a bank from outside the EU.

The European Banking Authority said EU states needed to ensure that depositors in the branches of UK banks in the bloc were adequately protected in case of a no-deal exit by Britain on March 29.

The regulator said the Britain’s departure was not likely to affect deposit protection in most credit institutions operating in the EU.

“It may affect branches of UK credit institutions in the EU depending on the decisions taken by the UK authorities on the potential exclusion of such branches from the scope of the UK depositor protection scheme, after the UK’s withdrawal from the EU.” the watchdog said on Friday

EBA said the unprecedented situation had forced it to take action because EU law on deposit protection does not say how cross-border payouts involving a non-EU bank branch should be carried out.

The watchdog noted that the Bank of England had proposed in October that EU branches of British banks would no longer be protected by Britain’s deposit protection scheme.

The BoE confirmed this approach on Thursday, the EBA said.

Under this approach, customers of British banks in the EU would lose protection unless the branches joined the local deposit guarantee scheme, EBA said.

The BoE had no immediate comment on EBA’s statement.

London-based EBA is moving to a new office in Paris because of Brexit.