Bank calls for Brexit transition deal by Christmas

The UK and the EU must agree on a Brexit transition deal by Christmas or risk banks triggering their contingency plans, the Bank of England has warned.

Deputy governor Sam Woods said that while the UK is committed to an implementation period, the EU's position "is not yet clear".

If no deal is reached, banks will begin a potentially disorderly shift of operations overseas.

He said that would mean banks becoming more complex and harder to supervise.

Speaking at the annual Mansion House City banquet in London, Mr Woods said: "If we get to Christmas and the negotiations have not reached any agreement on this topic, diminishing marginal returns will kick in."

He said: "Contingency planning is a sliding scale of increased commitment, investment and momentum through time. It is much more prudent and prosaic than hovering over the relocate button or rushing to the exit door."

While he said that the first phase of banks' contingency plans would have a relatively modest impact on jobs, "re-structuring by firms will in general increase their complexity".

"I struggle to see an outcome in which banks and insurers do not get harder to supervise and harder to resolve for all involved," said Mr Woods, who heads the Prudential Regulatory Authority, which oversees large lenders in the UK.

In her speech in Florence last month, Prime Minister Theresa May said there should be a transition period of "about" two years after Brexit.