THEY hoped—and believed—it wouldn’t happen. But now the world’s biggest banks must brace themselves for Britain’s departure from the European Union. Today bankers will simply be trying to weather the turmoil after yesterday’s vote. But in the weeks and months to come they will have to decide whether Brexit means shifting business and jobs away from Europe’s financial capital.

This morning’s numbers are frightening. Banks’ share prices have been hammered, and those of British lenders hit especially hard; the falls are all the harder for the pre-vote optimism that had borne the stockmarket up. Fear that Brexit might mean recession, plus sheer uncertainty, sent shares in Barclays and Lloyds down by almost 30% when the market opened. European banks were not spared: Deutsche Bank shed 21%, Credit Suisse and UBS 13% each. Shares in American banks with bases in London fell at the start of New York trading.

For all that, banks’ stability should not be in question. They have known for months that the vote was coming. Preparing for a Leave win, said a banker last month, was “no different from the daily analysis we do on our portfolios anyway”. The strengthening of supervision since the financial crisis should help too. Months ago the Bank of England promised extra “repo” auctions around the referendum—offering to lend money to any banks that can provide common securities as collateral. Big British banks have access to foreign currency through other central banks; the Bank of England has swap lines with other central banks. This morning it said it was “monitoring developments closely” and would “take all necessary steps to meet its responsibilities for monetary and financial stability”.

The current volatility should therefore be bearable. In the longer run, however, Britain’s financial industry could face severe difficulties. It thrives on the EU’s “passport” rules, under which banks, asset managers and other financial firms in one member state may serve customers in the other 27 without setting up local operations. That is how the British subsidiaries of non-EU banks (eg, Americans, Japanese and Swiss) are able to do business throughout Europe from London, and a big reason why London has become the EU’s financial capital. In the run-up to the vote TheCityUK, a trade body that opposed Brexit, boasted that London had around 70% of the market for euro-denominated interest-rate derivatives, 90% of European prime brokerage (assisting hedge funds with trading) and more besides.

Unless passports are renewed or replaced, they will lapse when Britain leaves. A deal is imaginable: the EU may deem Britain’s regulations as “equivalent” to its own. But agreement may not come easily. French and German politicians, keen to bolster their own financial centres and facing elections next year, may drive a hard bargain. No other non-member has full passport rights. Alternative models do not look attractive. Switzerland is a member of the European Free Trade Association, and has 120-odd bilateral agreements with the EU. Canada’s trade deal with the EU excludes most financial services. Norway has broad access to the single market, but has no say in setting the rules.

For now, nothing will change. Britain will stay in the EU for two years or more while it negotiates the terms of its exit. Banks have not yet spent much time on contingency planning: until Brexit was certain, there was little point. But now they will have to start work. Some booked time with their lawyers long ago, just in case.

Before the vote, few said publicly what they might do if Britons voted to go. Some sounded warnings: Jamie Dimon, boss of JPMorgan Chase, said this month that jobs could be lost; HSBC said in February that it might shift 1,000 people, around one-fifth of its staff in London, to Paris. Today HSBC, JPMorgan and Goldman Sachs, which is building a new regional headquarters in London, all sought to play down the possible effects. In a memo to staff Mr Dimon wrote: “Regardless of today’s outcome, we will maintain a large presence in London, Bournemouth and Scotland.” A Morgan Stanley spokesman denied a report that the bank has already begun a process of moving 2,000 investment-banking staff out of London.

London is surely too big, and its allure too strong, for any big bank to quit altogether. As well as banking expertise, it has a host of auxiliary trades, such as accountancy and law. But Brexit may still mean a fracturing of Europe’s financial industry. Shifting some business elsewhere will probably make sense. EU regulators may press banks to move people and capital across the Channel (or the Irish Sea). Deutsche Bank’s boss, John Cryan, has said it “would be odd” to trade euros and EU governent bonds in a branch outside the EU. Plenty think clearing euro transactions in London will become harder.

The City is not going to crumble. But it is likely to lose some business to other, smaller financial centres, meaning Dublin and Luxembourg as well as Frankfurt and Paris. Economies of scale in Britain would be reduced, while other places would be too small to compensate. For the world’s big banks, still trying to repair themselves eight years after the financial crisis and badgered by nagging regulators and impatient shareholders, the expense and disruption Brexit will inevitably bring is especially unwelcome. The Britons who voted for it will have little sympathy.

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