British Expats ‘Unbankable’ As Brexit Passports Set To End

Lisa Smith, BA (Hons), CeFA
By

British expats living in Europe are likely to join a mass of unbankables due to Brexit financial rules as the UK bows out of the European Union.

Unless politicians on both sides of The Channel can thrash out an agreement that lets British banks operate in the EU, tens of thousands of expats have had notice that their bank accounts and credit cards will close at 11pm on December 31.

That’s when the UK’s transition under the Brexit Withdrawal Agreement ends and the country officially breaks ties with the EU.

Brexit deadline looms

And unless foreign banks ride to the rescue, tens of thousands of expats will have no access to cash or cards as the Brexit clock runs down.

British banks including Lloyds, Barclays and Coutts have started to send letters to expats warning them of the fast approaching deadline.

The move marks the end of ‘passporting’ for the banks. Passporting rules allow a licensed bank based in one European Economic Area (EEA) nation to offer services in other EEA countries as if the licence were granted there.

From January 1, British banks are stripped of that right and to continue trading in the EEA they must apply for a licence in each country where they provide services.

British expats join Accidental Americans

Brexit places British expats in the same camp as Accidental Americans who are shunned as customers by many banks and financial institutions due to the demands of the US Foreign Account Tax Compliance Act (FATCA).

Accidental Americans are people outside the USA who have a link by birth to the country – for instance they were born in the USA but left as a child.

FATCA insists foreign financial institutions report their personal and financial customer data to the US Internal Revenue Service.

FATCA imposes a costly bureaucratic headache on banks and financial firms that has seen accounts close and credit refused for American expat customers.

Like Americans Brits abroad are losing their financial status because the banks feel ditching them as customers is cheaper and less hassle than complying with passporting rules.

Tens of thousands of expats impacted

Lloyds Bank – Britain’s largest banking group which includes brands Lloyds, Halifax and Bank of Scotland – has revealed 13,000 expats in Holland, Slovakia, Germany, Ireland, Italy and Portugal will lose their banking services from December 31.

The bank started sending warning letters to customers last month.

Barclays also disclosed letters were on the way to banking and credit card customers in France, Spain and Belgium.

The banks say that if a new passporting framework is not agreed soon, they will have no choice other than to close accounts.

The alternative is to apply for new licences in each of the 27 EU states and the three EEA nations.

The Treasury said: “We expect banks to treat their customers fairly and provide timely communications to enable them to make appropriate decisions. 

“However, the provision of banking services is a commercial decision for firms based on a variety of factors, including the local law and regulation of specific EEA countries.”

HSBC, NatWest and Santander, which make up Britain’s Big Five consumer banks with Lloyds and Barclays, say they are not closing customer accounts but are ‘considering their options’.

How The Brexit Withdrawal Agreement Works

Although Britain officially left the Eu on January 31, 2020, life and business remains the same in the UK and Europe while a transition agreement smooths the way for a complete break at 11pm on December 31. 2020.

Both sides decided an extra 12 months to discuss a new partnership was a good idea. However, there is no guarantee that any agreement would be made.

Passporting For Banks And Financial Firms

A financial institution in one EEA state that has permission to carry on activities there can trade in any other EEA state without applying for an additional licence under passporting arrangements.

The rules go on to state that if firms wish to carry on business that is not authorised in their home states, they must seek permission to trade.

On December 31, Britain loses membership of the EEA, so passporting no longer applies to UK banks and financial institutions serving customers in Europe.

If they have lost passporting rights, each bank and financial institution must go through rigorous licensing applications in each of the European states where they wish to continue to do business.

So, for example, Lloyds Banks is licensed to trade in the UK, which means the bank can passport services across the EU to serve expats and other customers. However, from December 31, Lloyds loses passporting rights and can no longer deal with customers in Europe.

Do Expats Have Other Banking Options?

Yes. Expats can open an account at a bank local to where they live or even an international account offered by the same banks that are closing their expat accounts.

HSBC, Lloyds, NatWest and Barclays are among the many banks with these accounts.

But there’s a catch – the banks cherry-pick their customers and typically want between £4,000 and £50,000 cash paid in as a deposit or at least £100,000 a year in salary to run through the account.

Some lenders refuse to open bank accounts or offer credit in ‘blacklisted’ countries with a high risk of fraud.

Most retired expats with a fixed retirement income would fail to qualify for the accounts.

American Express card holders can use their credit history from their former home to apply for another card in their new home under the global card transfer program.

Unbankable British Expats FAQ

The demise of passporting by banks seems an unforeseen consequence of Brexit, mainly because no one in the UK is affected – only those in Europe without a foreign bank account and help.

If you are one of the tens of thousands worried about your bank or credit card, here are some answers to the most asked questions about bank passporting.

How many expats are affected by Brexit passporting rules?

The banks have not disclosed an exact figure, but it’s likely to run into tens of thousands as more than 1.5 million British expats live within the EU

Why does the Brexit transition period end at 11pm on December 3?

It’s all to do with timing. Britain wanted to bow out of the EU at midnight on December 31, but that’s out of step with clocks across Europe that are an hour or two ahead of the UK. So, both sides agreed on 11pm, which is midnight for most of Europe

Can’t I register my credit card in the UK at a friend’s address?

The problem is money laundering rules for banks and credit card lenders. You must have a UK address and register on the electoral roll, which you cannot do from overseas. Other issues would be proving a credit history and tax issues if you remain UK resident

Is my money safe in an international bank account?

Most reputable banks belong to a deposit protection scheme run by a regulator, but not all schemes are equal in their terms and conditions or the amount of cash on deposit that they protect. Ask the bank for the details of the scheme they belong to before transferring your money

Will I still get my money if the bank closes my account?

Yes. Your bank should give you a time limit for transferring any funds to a new bank account and help with the arrangements.

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4 thoughts on “British Expats ‘Unbankable’ As Brexit Passports Set To End”

  1. Many UK citizens living in Europe are pensioners already in receipt of pensions. If they had a company pension, private pension or an annuity, most of these will not send the pension direct to a bank in the EU unlike the state pension which is unfortunate because these people need a UK bank account to get their pension and make other arrangements to transfer their pensions.

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  2. I would dispute the fact that this is an unforeseen consequence of Brexit as it was identified as a risk many many months ago if there were to be no trading agreement that encompassed financial services. The issue here is the downright incompetence of the UK Government in negotiating a deal and also it’s total lack of support for expats, because after all most of them no longer have voting rights and so cannot impact their majority. There also remains a risk with financial companies that provide annuities, Private Pensions, as they may not be able/willing to make payments overseas. Furthermore, companies that provide Investment services, stockbrokers and fund managers will no longer be able to provide services to European residents, hence the need to liquidate all investments prior to the end of the year. I for one will have to cancel all of my charity donations in the UK with no sterling funds being available.

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  3. I have a Nat West uk bank account in which my pension is paid and I have it transferred to my Spanish bank account every quarter.. what are the possibilities of Nat west keeping the passport banking in this scenario??

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  4. I believe it would not be difficult to post accurate, legally sound information for ‘ex-pats’ i.e. ‘imigrants’ who are tax resident in the EU/EEA countries, having UK bank accounts and UK sources of pensioner payroll income. So, take the DWP pension – at present this can be paid direct in euros to a Spanish
    bank. 2021 ? no answer about continuation from the DWP – Why? UK Public Service Pension – currently paid into Barclay’s – but an unhelpful almost abusive phone call tells me no help, no alternative, account closing – make your own arrangements. IN the absence of anything other than the constant frustrating rehearsal of anxt across all media all financial entities seem incomprehensibly incompetent at resolving this future ‘passporting’ difficulty. My local branch of a international money exchange company, based in the UK is particularly tight lipped about whether ANY service transferring £ to euros will be possible. Meanwhile giving notice to pension provider sources notifying a change of destination of pension needs a time scale, fast reducing with absolutely no idea of the correct, and legal way to proceed. Hopefully this post will soon be outdated, but today is a miserable disappointment for many in this position.

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