LONDON (Reuters) - Brexit poses risks to the ability of British companies to borrow from European banks and to some clearing activity which might have to relocate from London once Britain leaves the EU, the Bank of England said on Tuesday.

FILE PHOTO: A pedestrian walks past the Bank of England in the City of London, Britain April 19, 2017. REUTERS/Hannah McKay/File Photo

Banks from the bloc and other associated countries accounted for around 10 percent of lending to British companies, the BoE’s Financial Policy Committee (FPC) said in a summary of its most recent meeting held on Sept. 20.

Currently, those banks can operate as branches but they might have to upgrade to fully fledged subsidiaries after Brexit, a process that could take many months.

“The risk of disruption to wholesale UK banking services appeared to be slightly higher than previously thought, given that a number of EEA (European Economic Area) firms branching into the UK were not sufficiently focused on addressing this issue,” the FPC said in a statement.

The BoE’s Prudential Regulation Authority was “engaging firms to improve the state of their contingency planning.”

PRA Chief Executive Sam Woods told Reuters last week that he expected 130 license applications from branches.

“Firms would need to start seeking authorizations in 2018 Q1,” the FPC said.

The FPC also said there was a “substantial risk” of disruption to cross-border clearing operations in financial services, such as derivatives used by companies to hedge themselves against potential financial market swings.

The EU has published a draft law that would require clearing of euro-denominated transactions in some cases to be shifted from London to cities in the bloc after Brexit, a proposal resisted by Britain.

The FPC said clearing houses were examining contingency options “including the potential to relocate some clearing activity from the UK in order to continue to provide services to EU clients.”

But this option was not available in segments of the market “where the complexity and cost of any migration was significant”.

“In the event of access restrictions to those markets, EU firms would therefore have to move their activity to another CCP (clearing house), which was likely to be difficult to achieve before the point of EU withdrawal,” the FPC said.

LCH, a unit of the London Stock Exchange LSE.L and which dominates clearing in euro-denominated swaps, said it could not comment on any contingency plans.

Banks have said it would be costly and cumbersome to shift their derivatives positions to LCH's Paris unit or to another clearer like Eurex DB1Gn.DE in Frankfurt.