Lloyds Banking Group PLC (LON:LLOY) is reportedly planning to operate three subsidiaries in continental Europe after Brexit.
The London-based bank has already confirmed that it plans to open a subsidiary in Berlin but is now understood to be looking to open two further hubs to service customers in the European Union, according to Reuters.
READ: Lloyds Banking Group aiming to get Berlin office ready for post-Brexit business by the year-end
Frankfurt is likely to become home to one of the subsidiaries while the location of the other is yet to be confirmed, a source told the news agency.
A spokesperson for Lloyds declined to comment on the report when contacted by Proactive Investors.
UK-focused banks have been readying their contingency plans for the possibility that the UK leaves the European Union without a deal next March.
Lenders are trying to ensure that they will be able to continue selling their products across the UK and the EU after Brexit.
For Lloyds, the need to have more than one subsidiary in Europe is partly in response to Britain’s ring-fencing rules.
The ring-fencing rules require lenders to separate their retail operations from the rest of the business to protect consumers from another possible financial crash.
Lloyds is said to need a second subsidiary to support its euro bond trading business to comply with the rules after the UK leaves the EU.
The new home for the euro bond trading business is expected to be in Frankfurt.
Frankfurt is Europe’s largest euro bond trading market outside London.
The third subsidiary will support Lloyds’ Scottish Widows “closed-book” insurance business, which includes premium-paying policies from customers based across the EU.
The plan to run three continental units will lead to higher costs as each will need to be capitalised and licensed by regulators. However, the total pool of capital needed is not expected to be large compared with the size of the group’s overall balance sheet, Reuters said, citing its source.