Under the EU passport system, the lenders as well as financial companies are permitted to operate their transactions in all other 27 member countries of EU without securing approval from each country. Loosing of passport rights causes heavy blow to London’ status besides higher costs, diversion of management attention, restructure, reduction in profits are warranted.
EU’s single market can be accessible by the members of European Economic Area. The countries who signed with the European Economic Area the EU’s can access single market. The EEA grouped with the EU, Norway, Iceland and Liechtenstein. Under the single market system, the banks can provide the services to a customer who is in another country. Even the companies from outside EEA also permitted. If Britain comes out from EU, the British based firms should shift their location to inside the EEA.
During the negotiations with the EU, the Britain supposed to give priority in connection with the passporting rights. At least one fifty of banking sector’s annual revenue is associated with the passport banking. The other sectors such as insurance and asset management would negatively affect besides banking sector .
In case the Britain leaves the EU’s single market, there will be loss of banks’ passport rights.